Stock prices change as a result of changing market forces, which are supply and demand of these stocks. If there are more buyers than sellers for a particular company’s stock, the price of the stock will go up. Conversely, if there are more buyers than sellers for a specific company’s stock, the price will fall.
Getting the concept of supply and demand is not hard, the hard part is to understand why people like some stocks and dislike others. Different news and declarations play a vital role here. Buyers or sellers like or dislike a stock based on the published news about that stock. Moreover, the same news could be good for an investor, while it could be very bad for another.
Basically, the price moves with the investor’s changing perception about the true worth of the corresponding company. The price of a company’s share does not reflect the actual value of the company. The value of a company could be calculated by multiplying the number of issued shares with the stock price. Additionally, stock prices not only reflect the current worth of the company, it also contains hints about the investors’ perceptions about the future direction of the company.
The most crucial thing determining the actual value of a company is the earning. This is the profit a company makes by manufacturing goods or providing services, and without it, no company can sustain over time. Public companies need to report their annual earning once each quarter. The stocks of more profitable companies are the highest priced ones. Browse the other categories of our blog, you may find something useful.