Should you acquire more of CommScope (NASDAQ:COMM) based on new volatility?

Given the investment horizon of 90 days CommScope Holding is expected to generate 4.13 times more return on investment than the market. However, the company is 4.13 times more volatile than its market benchmark. It trades about 0.15 of its potential returns per unit of risk. The DOW is currently generating roughly 0.17 per unit of risk. As many old-fashioned traders are trying to avoid technology space, it makes sense to summarize CommScope Holding a little further and try to understand its current volatility patterns. We will go over a few points CommScope Holding stakeholders should remember regarding its volatility. CommScope Holding's low volatility may still impact the value of the stock as we estimate it as currently undervalued. The real value, based on our analysis, is getting close to 15.07 per share.
Published over a year ago
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Reviewed by Rifka Kats

CommScope Holding currently holds roughly 582.8 M in cash with 674.5 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 2.93.
Volatility is a rate at which the price of CommScope Holding or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of CommScope Holding may increase or decrease. In other words, similar to CommScope's beta indicator, it measures the risk of CommScope Holding and helps estimate the fluctuations that may happen in a short period of time. So if prices of CommScope Holding fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

Watch out for price decline

Please consider monitoring CommScope Holding on a daily basis if you are holding a position in it. CommScope Holding is trading at a penny-stock level, and the possibility of delisting is much higher compared to other stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion. Most exchanges require public instruments, such as CommScope Holding stock to be traded above the $1 level to remain listed. If CommScope Holding stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.

How important is CommScope Holding's Liquidity

CommScope Holding financial leverage refers to using borrowed capital as a funding source to finance CommScope Holding Co ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. CommScope Holding financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to CommScope Holding's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of CommScope Holding's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between CommScope Holding's total debt and its cash.

CommScope Holding Volatility Drivers

CommScope Holding unsystematic risk is unique to CommScope Holding and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in CommScope Holding you can also buy Desktop Metal. You can also mitigate this risk by investing in the information technology sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing CommScope Holding important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in CommScope Holding income statement and balance sheet. Here are more details about CommScope volatility.
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0.940.930.720.940.940.680.850.860.82-0.67-0.660.19-0.54-0.77-0.68-0.780.65
0.950.930.790.941.00.80.940.930.88-0.83-0.710.2-0.62-0.8-0.68-0.780.78
0.670.720.790.650.780.770.90.710.66-0.78-0.75-0.21-0.47-0.62-0.48-0.520.6
0.990.940.940.650.940.740.840.940.92-0.68-0.620.3-0.66-0.72-0.65-0.750.59
0.970.941.00.780.940.780.940.950.89-0.84-0.710.22-0.59-0.8-0.67-0.780.73
0.70.680.80.770.740.780.760.740.81-0.59-0.59-0.09-0.86-0.49-0.34-0.430.77
0.880.850.940.90.840.940.760.880.79-0.91-0.840.13-0.49-0.77-0.62-0.720.66
0.960.860.930.710.940.950.740.880.96-0.78-0.550.2-0.6-0.74-0.65-0.760.59
0.910.820.880.660.920.890.810.790.96-0.63-0.440.1-0.74-0.65-0.57-0.680.6
-0.76-0.67-0.83-0.78-0.68-0.84-0.59-0.91-0.78-0.630.75-0.230.30.730.610.67-0.58
-0.65-0.66-0.71-0.75-0.62-0.71-0.59-0.84-0.55-0.440.75-0.30.350.520.370.46-0.47
0.330.190.2-0.210.30.22-0.090.130.20.1-0.23-0.3-0.05-0.09-0.11-0.19-0.03
-0.6-0.54-0.62-0.47-0.66-0.59-0.86-0.49-0.6-0.740.30.35-0.050.130.030.14-0.6
-0.74-0.77-0.8-0.62-0.72-0.8-0.49-0.77-0.74-0.650.730.52-0.090.130.960.98-0.6
-0.65-0.68-0.68-0.48-0.65-0.67-0.34-0.62-0.65-0.570.610.37-0.110.030.960.97-0.44
-0.76-0.78-0.78-0.52-0.75-0.78-0.43-0.72-0.76-0.680.670.46-0.190.140.980.97-0.52
0.590.650.780.60.590.730.770.660.590.6-0.58-0.47-0.03-0.6-0.6-0.44-0.52
Click cells to compare fundamentals

Breaking it down

This firm reported the previous year's revenue of 8.6 B. Net Loss for the year was (1.09 B) with profit before overhead, payroll, taxes, and interest of 2.62 B.
 2018 2020 2021 (projected)
Long Term Debt to Equity2.274.85.18
Interest Coverage1.912.22.26

Chances of CommScope Holding stakeholders to go bonkers

The maximum drawdown is down to 14.66 as of today. CommScope Holding currently demonstrates below-verage downside deviation. It has Information Ratio of 0.24 and Jensen Alpha of 0.58. However, we do advice investors to further question CommScope Holding expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

Our Bottom Line On CommScope Holding

While few other entities in the communication equipment industry are either recovering or due for a correction, CommScope may not be as strong as the others in terms of longer-term growth potentials. While some medium-term oriented stakeholders may not share our view, we believe it may be a good time to take up new shares of CommScope.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Raphi Shpitalnik do not own shares of CommScope Holding Co. Please refer to our Terms of Use for any information regarding our disclosure principles.

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