The current bullish price patterns experienced by current Smith Micro shareholders created some momentum for stockholders as it was traded today as low as 6.43 and as high as 6.79 per share. The company directors and management have been very successful in rebalancing the company assets at opportune times to take advantage of market volatility in February. The stock standard deviation of daily returns for 30 days investing horizon is currently 3.8. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from Smith Micro Software partners.
Are you really shorting Smith (NASDAQ:SMSI) based on its volatility?
 | By Gabriel Shpitalnik | Macroaxis Story |
Given the investment horizon of 90 days Smith Micro is expected to generate 4.71 times more return on investment than the market. However, the company is 4.71 times more volatile than its market benchmark. It trades about 0.08 of its potential returns per unit of risk. The DOW is currently generating roughly 0.1 per unit of risk. As many adventurous traders are excited about technology space, it is only fair to concentrate on the risk of shorting Smith Micro Software based on its current volatility spike. We will examine why it could be a different year for Smith Micro shareholders.
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Reviewed by Ellen Johnson
The company currently holds 6.53 M in liabilities with Debt to Equity (D/E) ratio of 0.11, which may suggest the firm is not taking enough advantage from borrowing. Smith Micro Software has a current ratio of 4.66, suggesting that it is liquid enough and is able to pay its financial obligations when due. Volatility is a rate at which the price of Smith Micro 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 Smith Micro may increase or decrease. In other words, similar to Smith's beta indicator, it measures the risk of Smith Micro and helps estimate the fluctuations that may happen in a short period of time. So if prices of Smith Micro 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 Smith Micro's Liquidity
Smith Micro financial leverage refers to using borrowed capital as a funding source to finance Smith Micro Software ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Smith Micro 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 Smith Micro'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 Smith Micro'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 Smith Micro's total debt and its cash.
Smith Micro Gross Profit
Smith Micro Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Smith Micro previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Smith Micro Gross Profit growth over the last 10 years. Please check Smith Micro's gross profit and other fundamental indicators for more details.
Smith Micro Volatility Drivers
Smith Micro unsystematic risk is unique to Smith Micro Software 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 Smith Micro you can also buy OneSoft Solutions. 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 Smith Micro 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 Smith Micro income statement and balance sheet. Here are more details about Smith volatility.Click cells to compare fundamentals
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