Should You Be Concerned About Orbit Garant Drilling Inc.'s (TSE:OGD) Historical Volatility?

Simply Wall St
·3 min read

Anyone researching Orbit Garant Drilling Inc. (TSE:OGD) 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. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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.

Check out our latest analysis for Orbit Garant Drilling

What does OGD's beta value mean to investors?

Given that it has a beta of 1.32, we can surmise that the Orbit Garant Drilling share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Orbit Garant Drilling shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether Orbit Garant Drilling is growing earnings and revenue. You can take a look for yourself, below.

TSX:OGD Income Statement April 15th 2020
TSX:OGD Income Statement April 15th 2020

Does OGD's size influence the expected beta?

Orbit Garant Drilling is a noticeably small company, with a market capitalisation of CA$19m. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since Orbit Garant Drilling has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether OGD is a good investment for you, we also need to consider important company-specific fundamentals such as Orbit Garant Drilling’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Financial Health: Are OGD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

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

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.