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Anyone researching Lisi S.A. (

EPA:FII

) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Beta is a widely used metric to measure a stock’s exposure to market risk (volatility). Before we go on, it’s worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that ‘volatility is far from synonymous with risk.’ Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

See our latest analysis for Lisi

What FII’s beta value tells investors

Given that it has a beta of 0.83, we can surmise that the Lisi share price has not been strongly impacted by broader market volatility (over the last 5 years). This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Beta is worth considering, but it’s also important to consider whether Lisi is growing earnings and revenue. You can take a look for yourself, below.

ENXTPA:FII Income Statement Export February 1st 19

How does FII’s size impact its beta?

Lisi is a small company, but not tiny and little known. It has a market capitalisation of €1.5b, which means it would be on the radar of intstitutional investors. Small companies can have a low beta value when company specific factors outweigh the influence of overall market volatility. That might be happening here.

What this means for you:

The Lisi doesn’t usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether FII is a good investment for you, we also need to consider important company-specific fundamentals such as Lisi’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

Story continues

Future Outlook

: What are well-informed industry analysts predicting for FII’s future growth? Take a look at our

free research report of analyst consensus

for FII’s outlook.

Past Track Record

: Has FII 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 FII’s historicals

for more clarity.

Other Interesting Stocks

: It’s worth checking to see how FII measures up against other companies on valuation. You could start with this

free list of prospective options

.

To help readers see past 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. For errors that warrant correction please contact the editor at

[email protected]

.

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