AIM:MTL Income Statement Feb 28th 18
Can MTL’s asset-composition point to a higher 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 MTL’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. MTL’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 MTL indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts MTL’s current beta value which indicates a below-average volatility.
What this means for you:
MTL 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 MTL is valuable to lower your risk of market exposure, in particular, during times of economic decline. In order to fully understand whether MTL is a good investment for you, we also need to consider important company-specific fundamentals such as Metals Exploration’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is MTL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has MTL been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MTL’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks 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.