Does the profit of the company, popularity of the company's products, the selling of the products, the welfare of the company, etc. help determine the price of a share??
2006-09-01 05:58:10 · 8 answers · asked by Anonymous in Business & Finance ➔ Investing
So all these things don't affect the price directly? For example, if a company is making tons of profit, are they allowed to make the price of the share higher?
2006-09-01 06:06:31 · update #1
Being as this is a free market, nothing determines the price of a share of stock other than supply and demand - what a willing buyer and a willing seller are willing to buy and sell for on any given day.
That said, what people are willing to buy and sell for determined by a number of factors. The most important is the profits (this will be half of the price/earnings multiple). Other factors include the underlying value of all of the company's assets (this will be half of the price/book ratio), the revenues of the company (generally half of price to sales ratio), and the news of a company. For instance, if ebay just said that their Skype unit is getting together with Google talk's unit to put together click to call services, that is news about ebay and news about google. If investors think this is good news for one or both, supply and demand will drive the respective shares higher.
There is more, but I guess we could be here all day, so we'll just leave it at that. Hope it was helpful.
2006-09-02 07:17:45 · answer #1 · answered by Byron W 3 · 0⤊ 0⤋
Kind of. All the things you listed create a demand for the company's shares. If the company is doing well, people want in on the profits of that, and buy. If a company is doing bad, people don't want a company's stocks that are no good. So yes, in a way, the profit, the popluarity, selling, release of new, in demand, popular products. Another factor is mergers generally tend to raise the stock up. New laws prohibiting certain products can also drop a stock (Martha Stewart anyone?) Hope this helps!
2006-09-01 13:02:04 · answer #2 · answered by icomeanons 2 · 1⤊ 0⤋
You are actually buying the rights to future dividends. The dividends are money you will recieve in the future from company profits and those amounts are unknown and not garenteed. The demand for those dividends then determines price.
The company doesn't (or isn't supposed to) control the price unless it is a direct stock offering. The market speculates as to what the dividends will be. The company that is most likely to pay the highest dividends has a higher stock price.
2006-09-01 13:06:19 · answer #3 · answered by Nate87 2 · 1⤊ 0⤋
You need to get a book from the library about stock and market valuations. Everything in the world affects the price of a stock at any particular time because those things affect supply and demand. Some things affect the price more that others but it is always the supply and demand for a particular stock.
2006-09-01 16:30:52 · answer #4 · answered by woodluvto 2 · 0⤊ 0⤋
The main determinants of stock price are the expected cash flows to the firm, the expected rate of growth of the cash flows and the risk of the cash flows to the firm.
Eventually, the market sets the price -- but if the company increases the cash flow or the growth rate, or lowers the risk -- then the the market will reward this and price will increase.
2006-09-01 13:33:51 · answer #5 · answered by Ranto 7 · 2⤊ 0⤋
to keep it simple another factor besides demand that makes shares fluctuate are the amount of shares outstanding everything else really doesnt count on a basic level its all supply and demand the if people are buying gold because the dollar is losing value then the price of gold will increase since it is scarce and demand is high
2006-09-01 17:45:30 · answer #6 · answered by Anonymous · 0⤊ 0⤋
yes, you are right. in additio from your question, political environment, customer sastifaction, good word from employee, market cycle too, like when economy slowing down, nobody want purchase a high ticket item As right now, with the gas price high price, who will drive the big trucks?
one time I read one article from businessweek magazine, they list the comapny with customer complain, the more customer complain, it is foretell the stock will go down. The good example right now is DELL, before DEll announce earing, battery problem, Dell have a lot of complain about tech support. that a leading indicators. Also HP is classic example, as long as Carly Frorina still CEO, the stock doesn''t move, as soon the mark hurd in, the stock move higher. That how wallstreet perceived management style of CEO too
2006-09-01 13:11:52 · answer #7 · answered by Hoa N 6 · 0⤊ 0⤋
Yes all of it does,, Plus the fact that you have extenuating circumstances like people buying calls and puts on alot of the stocks meaning shorting or longing them....which unbalances the overall cost ..
2006-09-01 13:06:35 · answer #8 · answered by Anonymous · 0⤊ 0⤋