Is PSA’s cost structure indicative of a high beta?

During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I test PSA’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, PSA appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. As a result, this aspect of PSA indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts PSA’s current beta value which indicates a below-average volatility.

What this means for you:

You could benefit from lower risk during times of economic decline by holding onto PSA. 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. Depending on the composition of your portfolio, PSA may be a valuable stock to hold onto in order to cushion the impact of a downturn. In order to fully understand whether PSA is a good investment for you, we also need to consider important company-specific fundamentals such as Petsec Energy’s financial health and performance track record. I urge you to complete your research by taking a look at the following:

1. Financial Health: Is PSA’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 PSA 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 PSA’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.

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.