AIM:WTI Income Statement Jan 5th 18
Is WTI’s cost structure indicative of a high beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I examine WTI’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, WTI appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. Thus, we can expect WTI 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. However, this is the opposite to what WTI’s actual beta value suggests, which is lower stock volatility relative to the market.
What this means for you:
Are you a shareholder? You could benefit from lower risk during times of economic decline by holding onto WTI. 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. Depending on the composition of your portfolio, WTI may be a valuable stock to hold onto in order to cushion the impact of a downturn. For next steps, take a look at WTI’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.
Are you a potential investor? Depending on the composition of your portfolio, WTI may be a valuable addition to cushion the impact of a downturn. Potential investors should look into its fundamental factors such as its current valuation and financial health. Take into account your portfolio sensitivity to the market before you invest in WTI, as well as where we are in the current economic cycle. You can examine these factors in our free fundamental research report for WTI 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.