ASX:SDL Income Statement Jan 11th 18
More Is SDL’s cost structure indicative of a high 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 SDL’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. SDL’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. As a result, this aspect of SDL indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. However, this is the opposite to what SDL’s actual beta value suggests, which is lower stock volatility relative to the market.
What this means for you: Are you a shareholder? SDL 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 SDL is valuable to lower your risk of market exposure, in particular, during times of economic decline. For next steps, take a look at SDL’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, SDL 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 SDL, as well as where we are in the current economic cycle. You can examine these factors in our free fundamental research report for SDL 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.