Can Micro Focus International's (LON:MCRO) share price keep beating the market?

Micro Focus International (LON:MCRO) is a UK-based global software company that we classify as a 'High Flyer' stock: a heady mix of high quality, high momentum, and low value. It is a dangerous (if potentially lucrative) part of the market to play in.

Micro Focus International (LON:MCRO) is a large cap stock that caters to various industries, such as Federal, airlines and healthcare. When we analyse Micro Focus International from a factor perspective, we find that it has a: 

• Quality Rank of 67,
• Momentum Rank of 99, 
• Value Rank of only 37. 

This is the classic factor profile of a High Flyer.

This mixture 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.

Micro Focus International (LON:MCRO): how safe is this high flyer?

So, High Flyers tend to be riskier and more volatile than the market average. But is this true of Micro Focus International?

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)

Micro Focus International 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 Micro Focus International’s favour is its above average five-year return on capital employed figure of 89.5%. Being consistently profitable to such a degree over multiple years suggests that Micro Focus International 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 - Micro Focus International has a one-year relative strength of 96.4%.

Find the rockstars of the stock market

High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.

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