Should you buy more of Daktronics (NASDAQ:DAKT) based on newest volatility?

20% of stocks are less volatile than Daktronics, and 97% of all traded equity instruments are projected to make higher returns than the company over the 60 days investment horizon. As many old-fashioned traders are trying to avoid technology space, it makes sense to review Daktronics a little further and try to understand its current volatility patterns. We are going to break down if the current expected returns justify Daktronics' volatility.
Published over a year ago
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Reviewed by Raphi Shpitalnik

Daktronics currently holds roughly 45.84 M in cash with 37.57 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 1.03.
Volatility is a rate at which the price of Daktronics 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 Daktronics may increase or decrease. In other words, similar to Daktronics's beta indicator, it measures the risk of Daktronics and helps estimate the fluctuations that may happen in a short period of time. So if prices of Daktronics 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.

How important is Daktronics's Liquidity

Daktronics financial leverage refers to using borrowed capital as a funding source to finance Daktronics ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Daktronics 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 Daktronics' 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 Daktronics' 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 Daktronics's total debt and its cash.

Daktronics Volatility Drivers

Daktronics unsystematic risk is unique to Daktronics 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 Daktronics you can also buy Allient. 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 Daktronics 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 Daktronics income statement and balance sheet. Here are more details about Daktronics volatility.
-0.040.960.70.90.790.310.680.980.710.12-0.28-0.81-0.08-0.35-0.17-0.11-0.67
-0.040.14-0.240.020.24-0.470.370.04-0.36-0.520.01-0.44-0.09-0.37-0.73-0.040.53
0.960.140.660.930.90.190.820.930.56-0.03-0.3-0.92-0.17-0.48-0.42-0.13-0.44
0.7-0.240.660.750.620.590.430.660.81-0.17-0.59-0.420.26-0.560.08-0.6-0.61
0.90.020.930.750.90.410.70.880.59-0.19-0.51-0.750.12-0.36-0.25-0.1-0.5
0.790.240.90.620.90.230.810.780.37-0.27-0.46-0.830.01-0.44-0.52-0.08-0.21
0.31-0.470.190.590.410.23-0.180.270.39-0.3-0.730.10.690.160.50.01-0.59
0.680.370.820.430.70.81-0.180.660.27-0.11-0.11-0.89-0.37-0.6-0.69-0.25-0.03
0.980.040.930.660.880.780.270.660.740.12-0.24-0.780.02-0.31-0.15-0.07-0.67
0.71-0.360.560.810.590.370.390.270.740.3-0.18-0.30.22-0.340.35-0.47-0.84
0.12-0.52-0.03-0.17-0.19-0.27-0.3-0.110.120.30.70.08-0.440.230.30.13-0.32
-0.280.01-0.3-0.59-0.51-0.46-0.73-0.11-0.24-0.180.70.14-0.580.13-0.070.120.26
-0.81-0.44-0.92-0.42-0.75-0.830.1-0.89-0.78-0.30.080.140.380.60.710.150.13
-0.08-0.09-0.170.260.120.010.69-0.370.020.22-0.44-0.580.380.320.530.07-0.31
-0.35-0.37-0.48-0.56-0.36-0.440.16-0.6-0.31-0.340.230.130.60.320.570.84-0.11
-0.17-0.73-0.420.08-0.25-0.520.5-0.69-0.150.350.3-0.070.710.530.570.1-0.61
-0.11-0.04-0.13-0.6-0.1-0.080.01-0.25-0.07-0.470.130.120.150.070.840.10.05
-0.670.53-0.44-0.61-0.5-0.21-0.59-0.03-0.67-0.84-0.320.260.13-0.31-0.11-0.610.05
Click cells to compare fundamentals

A Deeper Perspective On Daktronics

Daktronics reported the previous year's revenue of 572.32 M. Net Income was 928 K with profit before overhead, payroll, taxes, and interest of 138.7 M.
 2010 2011 2015 2020 (projected)
Receivables Turnover4.555.038.336.99
PPandE Turnover4.638.789.028.87

Another setback for Daktronics private investors

Value At Risk just dropped to -3.46, may call for upcoming price decrease. Daktronics currently demonstrates below-verage downside deviation. It has Information Ratio of 0.01 and Jensen Alpha of 0.05. However, we do advice investors to further question Daktronics expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

Our Takeaway on Daktronics Investment

Whereas some firms in the computer hardware industry are either recovering or due for a correction, Daktronics may not be performing as strong as the other in terms of long-term growth potentials. To conclude, as of the 2nd of December 2020, our research shows that Daktronics is a rather slightly risky investment opportunity with a very low chance of bankruptcy in the next two years. From a slightly different view, the entity currently appears to be fairly valued. Our ongoing 30 days Buy-Hold-Sell recommendation on the firm is Strong Hold.

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Editorial Staff

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