Canada Markets close in 4 hrs 17 mins

What Kind Of Share Price Volatility Should You Expect For Lazard Ltd (NYSE:LAZ)?

Simply Wall St

Anyone researching Lazard Ltd (NYSE:LAZ) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 are more sensitive to general market forces than others. 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. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

Check out our latest analysis for Lazard

What LAZ's beta value tells investors

Looking at the last five years, Lazard has a beta of 1.70. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that Lazard shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. 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 Lazard fares in that regard, below.

NYSE:LAZ Income Statement, December 19th 2019

Could LAZ's size cause it to be more volatile?

Lazard is a fairly large company. It has a market capitalisation of US$4.1b, which means it is probably on the radar of most investors. It has a relatively high beta, suggesting it may be somehow leveraged to macroeconomic conditions. For example, it might be a high growth stock with lots of investors trading the shares. It's notable when large companies to have high beta values, because it usually takes substantial capital flows to move their share prices.

What this means for you:

Beta only tells us that the Lazard share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Lazard’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for LAZ’s future growth? Take a look at our free research report of analyst consensus for LAZ’s outlook.
  2. Past Track Record: Has LAZ 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 LAZ's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how LAZ 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.