ASX:WLC Income Statement Nov 22nd 17
How WLC’s assets could affect its beta
During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I examine WLC’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. WLC’s fixed assets to total assets ratio of higher than 30% shows that the company uses up a big chunk of its capital on assets that are hard to scale up or down in short notice. Thus, we can expect WLC to be more volatile in the face of market movements, relative to its peers of similar size but with a lower proportion of fixed assets on their books. Similarly, WLC’s beta value conveys the same message.
What this means for you:
Are you a shareholder? You could benefit from higher returns from WLC during times of economic growth. Its higher fixed cost isn’t a major concern given margins are covered with high consumer demand. However, in times of a downturn, it may be safe to look at a more defensive stock which can cushion the impact of lower demand. For more company-specific research on WLC, check out our our free analysis plaform here.
Are you a potential investor? I recommend that you look into WLC’s fundamental factors such as its current valuation and financial health as well. Take into account your portfolio sensitivity to the market before you invest in the stock, as well as where we are in the current economic cycle. WLC may be a great investment during times of economic growth. You can examine these factors in our free fundamental research report for WLC here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.