How do stocks value change?
The important things to grasp about stock value change are the following:
* At the most fundamental level, supply and demand in the market determines stock price.
* Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless.
* Theoretically, earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price.
* There are many theories that try to explain the way stock prices move the way they do. Unfortunately, there is no one theory that can explain everything.
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in determining price movements. When a company has a better-than-expected earnings report, stock prices tend to rise at a higher rate than originally forecast - hence, investors get a good return on their money in the form of income (dividends), capital gains (the profit made from the stock when it is sold), or both. Outside factors such as oil prices may temporarily drive stock prices down, but these tend to be short-term issues that do not significantly impact the underlying value of the stock. Of course, stock prices also trend downward when the company fails to meet the expectations of investors or experiences internal factors that may negatively impact earnings that were previously unknown. In such a case, the underlying value of ...more