One Thing To Remember About The Farmers National Banc Corp. (NASDAQ:FMNB) Share Price


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. 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.

See our latest analysis for Farmers National Banc

What FMNB’s beta value tells investors

Zooming in on Farmers National Banc, we see it has a five year beta of 0.88. This is below 1, so historically its share price has been rather independent from the market. This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Farmers National Banc’s revenue and earnings in the image below.

NasdaqCM:FMNB Income Statement, January 28th 2020
NasdaqCM:FMNB Income Statement, January 28th 2020

Could FMNB’s size cause it to be more volatile?

Farmers National Banc is a noticeably small company, with a market capitalisation of US$462m. Most companies this size are not always actively traded. Companies with market capitalisations around this size often show poor correlation with the broader market because market volatility is overshadowed by company specific events, or other factors. It’s worth checking to see how often shares are traded, because very small companies with very low beta values are often only thinly traded.

What this means for you:

Since Farmers National Banc is not heavily influenced by market moves, its share price is probably far more dependent on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Farmers National Banc’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for FMNB’s future growth? Take a look at our free research report of analyst consensus for FMNB’s outlook.
  2. Past Track Record: Has FMNB 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 FMNB’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how FMNB measures up against other companies on valuation. You could start with this free list of prospective options.

