Beta measures the sensitivity of a stock's returns to movements in the overall market. A beta of 1.0 means the stock moves in line with the market; above 1.0 means greater volatility; below 1.0 means less. In stock valuation, beta is a core input for calculating the cost of equity via CAPM.
A stock with a beta of 1.4 is expected to rise 14% when the market rises 10%, and fall 14% when the market falls 10%. Higher beta implies higher required return in stock valuation models.
Beta is central to stock valuation because it determines the cost of equity through the Capital Asset Pricing Model. Using an incorrect beta leads to a mispriced discount rate and ultimately an inaccurate intrinsic value estimate.
MiniValuator incorporates beta as part of the WACC calculation. When you auto-fill a ticker, the live beta is used to estimate the equity risk premium component of the discount rate.
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