【checkers or wreckers】Should You Be Holding TrueCar Inc (TRUE) Right Now?

发布时间：2024-09-29 08:21:53 来源：dodson we got dodgson here gif 作者：Entertainment

If you are looking to invest in TrueCar Inc’s (

NASDAQ:TRUE

),checkers or wreckers or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures TRUE’s exposure to the wider market risk, which reflects changes in economic and political factors. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta value of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.

See our latest analysis for TRUE

What does TRUE's beta value mean?

TrueCar has a beta of 2.98, which means that the percentage change in its stock value will be higher than the entire market in times of booms and busts. A high level of beta means investors face higher risk associated with potential gains and losses driven by market movements. Based on this beta value, TRUE will help diversify your portfolio, if it currently comprises of low-beta stocks. This will be beneficial for portfolio returns, in particular, when current market sentiment is positive.

Does TRUE's size and industry impact the expected beta?

With a market cap of USD $1.45B, TRUE falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Furthermore, the company operates in the internet software and services industry, which has been found to have high sensitivity to market-wide shocks. So, investors should expect a larger beta for smaller companies operating in a cyclical industry in contrast with lower beta for larger firms in a more defensive industry. This supports our interpretation of TRUE’s beta value discussed above. Fundamental factors can also drive the cyclicality of the stock, which we will take a look at next.

NasdaqGS:TRUE Income Statement Oct 1st 17

Can TRUE's asset-composition point to a higher beta?

An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I examine TRUE’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, TRUE doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. However, this is the opposite to what TRUE’s actual beta value suggests, which is higher stock volatility relative to the market.

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What this means for you:

Are you a shareholder?

You could benefit from higher returns during times of economic growth by holding onto TRUE. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. Consider the stock in terms of your other portfolio holdings, and whether it is worth investing more into TRUE.

Are you a potential investor?

I recommend that you look into TRUE's fundamental factors such as its current valuation and financial health. Take into account your portfolio sensitivity to the market before you invest in the stock, as well as where we are in the current economic cycle. TRUE may be a great investment during times of economic growth.

Beta is one aspect of your portfolio construction to consider when holding or entering into a stock. But it is certainly not the only factor.

Take a look at our most recent infographic report on TrueCar

for a more in-depth analysis of the stock to help you make a well-informed investment decision. But if you are not interested in TrueCar anymore, you can use our free platform to see my list of over

50 other stocks with a high growth potential

.

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.

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