Boohoo is a mid cap stock in the Apparel & Accessories Retailers industry. When we analyse Boohoo from a factor perspective, we find that it has a:
- Quality Rank of 94,
- Momentum Rank of 69,
- Value Rank of only 8.
This is the classic factor profile 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.
Boohoo (LON:BOO): flying high but is it safe?
So, is Boohoo's share price at risk of falling back to earth?
We can find out quickly by applying Stockopedia’s RiskRatings system, which divides stocks into five groups according to stock price volatility. The five classifications (from most to least volatile) are:
- Highly Speculative (30% of the market),
- Speculative (25% of the market),
- Adventurous (20% of the market),
- Balanced (15% of the market), and
- Conservative (10% of the market)
Boohoo is a speculative stock. This means that the group is in the more volatile half 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.
One thing in Boohoo’s favour is its above average five-year return on capital employed figure of 34.2%. Being consistently profitable to such a degree over multiple years suggests that Boohoo can back up its favourable factor exposures with some kind of economic moat and, hopefully, make any share price volatility more bearable in the short term.
This attractive blend of factors and profitability characteristics has been noticed by the market - Boohoo has a one-year relative strength of 32.3%.
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.