【bayer rose and flower insect killer】Is Old Second Bancorp, Inc. (NASDAQ:OSBC) A Volatile Stock?
Anyone researching Old Second Bancorp,bayer rose and flower insect killer Inc. (
NASDAQ:OSBC
) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 Old Second Bancorp
What OSBC’s beta value tells investors
As it happens, Old Second Bancorp has a five year beta of 0.91. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Old Second Bancorp’s revenue and earnings in the image below.
NasdaqGS:OSBC Income Statement Export January 2nd 19
Could OSBC’s size cause it to be more volatile?
Old Second Bancorp is a rather small company. It has a market capitalisation of US$384m, which means it is probably under the radar of most investors. It doesn’t take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.
What this means for you:
It is probable that there is a link between the share price of Old Second Bancorp and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that’s your game, metrics such as revenue, earnings and cash flow will be more useful. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Old Second Bancorp’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 OSBC’s future growth? Take a look at our
free research report of analyst consensus
for OSBC’s outlook.
Past Track Record
: Has OSBC 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 OSBC’s historicals
for more clarity.
Other Interesting Stocks
: It’s worth checking to see how OSBC 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
.
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