ASX:VAR Income Statement Jan 5th 18
How VAR’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 VAR’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%, VAR appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. As a result, this aspect of VAR indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts VAR’s current beta value which indicates a below-average volatility.
What this means for you:
Are you a shareholder? VAR may be a worthwhile stock to hold onto in order to cushion the impact of a downturn. Depending on the composition of your portfolio, low-beta stocks such as VAR is valuable to lower your risk of market exposure, in particular, during times of economic decline. For more company-specific research on VAR, check out our our free analysis plaform here.
Are you a potential investor? Depending on the composition of your portfolio, VAR 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 VAR, as well as where we are in the current economic cycle. Continue your research on the stock with our free fundamental research report for VAR 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.