β vs Financial Leverage:

An organization’s capital (#equity) is subject to systemic risk related to industry cyclicality, operational leverage, and financial leverage… The most significant impact on this uncertainty is seen in management decision-making and financial policy…

Therefore, when assessing discounted cash flows for valuation, we should consider whether the organization’s financial policy has significantly changed…

For instance, Amazon’s beta was around 1.6 in 2020, but it decreased to around 1.14 by now. Although nothing else changed, this change increased the stock price by approximately 25%.

Chart source: Corporate Valuation Theory, Evidence and Practice, Mark E. Zmijewski; Robert W. Holthausen