Market forces influence stock values on a daily basis. This means that stock prices fluctuate due to supply and demand. When there are more people who want to buy a stock (demand) than there are those who want to sell it (supply), the price rises. If more individuals wanted to sell a stock than acquire it, the supply would exceed the demand, and the price would fall.
It's simple to understand supply and demand. What's more difficult to understand is what makes individuals like one stock and dislike another. It all boils down to determining what news is good for a corporation and what news is bad. There are numerous solutions to this problem, and almost every investor you speak with will have their own thoughts and techniques.
However, the main premise is that a stock's price fluctuation reflects what investors believe a firm is worth. Don't mistake a company's worth for its stock price. A company's market capitalization is calculated by multiplying the stock price by the number of outstanding shares. A company that trades at $100 per share and has 1,000,000 outstanding shares has a lower value than one that trades at $50 per share and has 5,000,000 outstanding shares ($100 x 1,000,000 = $100,000,000, while $50 x 5,000,000 = $250,000,000). To make matters even more complicated, a stock's price reflects not only the company's current value, but also the growth that investors anticipate in the future.
Earnings are the most crucial aspect that influences a company's worth. Earnings are a firm's profit, and no company can thrive without them in the long run. When you think about it, it makes logic. A corporation will not be able to stay in business if it never makes money. The earnings of public corporations must be reported four times a year (once each quarter). During these periods, referred to as earnings seasons, Wall Street pays close attention. The reason for this is because analysts use earnings projections to determine a company's future value. The price rises when a company's earnings surprise (are better than predicted). If a company's results disappoint (are worse than expected), then the price will fall.
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