Can MLN’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 test MLN’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. MLN’s fixed assets to total assets ratio of higher than 30% shows that the company uses up a big chunk of its capital on assets that are hard to scale up or down in short notice. Thus, we can expect MLN to be more volatile in the face of market movements, relative to its peers of similar size but with a lower proportion of fixed assets on their books. Similarly, MLN’s beta value conveys the same message.

What this means for you:

Are you a shareholder? You may reap the gains of MLN’s returns in times of an economic boom. Though the business does have higher fixed cost than what is considered safe, during times of growth, consumer demand may be high enough to not warrant immediate concerns. However, during a downturn, a more defensive stock can cushion the impact of this risk. For next steps, take a look at MLN’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.

Are you a potential investor? Before you buy MLN, you should factor how your portfolio currently moves with the wider market, and where we are in the economic cycle. This stock could be an outperformer during times of growth, and it may be worth taking a deeper dive into the fundamentals to crystalize your thoughts on MLN. You can examine these factors in our free fundamental research report for MLN 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.