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Does Synaptics Incorporated (NASDAQ:SYNA) Have A Volatile Share Price?

If you own shares in Synaptics Incorporated (NASDAQ:SYNA) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know 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.

View our latest analysis for Synaptics

What does SYNA's beta value mean to investors?

Looking at the last five years, Synaptics has a beta of 1.20. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If this beta value holds true in the future, Synaptics shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Synaptics fares in that regard, below.

NasdaqGS:SYNA Income Statement, January 21st 2020
NasdaqGS:SYNA Income Statement, January 21st 2020

How does SYNA's size impact its beta?

Synaptics is a reasonably big company, with a market capitalisation of US$2.4b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.

What this means for you:

Since Synaptics tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Synaptics’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

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  1. Future Outlook: What are well-informed industry analysts predicting for SYNA’s future growth? Take a look at our free research report of analyst consensus for SYNA’s outlook.

  2. Past Track Record: Has SYNA 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 SYNA's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how SYNA measures up against other companies on valuation. You could start with this free list of prospective options.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.