Stockopedia’s ‘High Flyers’ are high quality, growing stocks with a history of beating estimates - and small cap Treatt is one of them.
The group specialises in providing ingredients to the flavor, fragrance and consumer goods markets. When we analyse it from a factor perspective, we find that it has a Quality Rank of 69, a Momentum Rank of 61, but a Value Rank of only 23. This means it qualifies for our definition of a High Flyer.
A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. The higher they rise the harder they fall, after all - and few stocks stay High Flyers for long.
What kind of High Flying stock is LON:TET?
So, High Flyers tend to be riskier and more volatile than the market average. But is this true of Treatt?
We can find out quickly by applying Stockopedia’s RiskRatings system, which splits the stock market into five buckets according to stock price volatility. The five classifications (from least to most volatile) are:
- Conservative (10% of the market)
- Balanced (15% of the market)
- Adventurous (20% of the market)
- Speculative (25% of the market)
- Highly Speculative (30% of the market)
Treatt is an adventurous stock. This means that the group is towards the riskier end of the market in terms of stock price volatility, as might be expected of a High Flyer. Those looking to invest here should prepare themselves for a potentially bumpy ride. It also qualifies for one of our short-selling screens - you can look into this more by checking the group's StockReport.
That said, we can see from Treatt’s above average five-year return on capital employed figure of 17.2% that the group has been highly profitable over multiple years. This suggests that Treatt can back up its favourable factor exposures and volatility characteristics with some kind of economic moat.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.