Factors Affecting Stock Prices

Like any other product, in the stock market, share prices also depend on many factors. Therefore, it is difficult to pinpoint just one or two factors that affect the stock price. There are still some factors that directly influence share prices.

demand and supply – This fundamental rule of economics is also valid for the stock market. The price is directly affected by the trend of stock trading. When more people buy a certain stock, the price of that stock rises and when more people sell the stock, the price of that particular stock falls. Now it is difficult to predict the market trend, but your stockbroker can give you a clear idea of ​​the current market trend, but be careful before blindly following the advice.

News – News is undoubtedly a very important factor when it comes to stock prices. Positive news about a company can increase buying interest in the market, while a negative news release can ruin a stock’s outlook. Having said that, you should always remember that many times, despite good news, a stock may show minimal movement. It is the overall performance of the company that matters more than the news. It is always wise to adopt a wait-and-see policy in a volatile market or when there is a mixed reaction on a particular stock.

market cap – If you’re trying to guess the value of a company from its share price, you’re making a big mistake. It is the market capitalization of the company, rather than the shares, that is more important when it comes to determining the value of the company. You must multiply the share price by the total number of shares outstanding. Inventory in the market to get the market capitalization of a company and that is the value of the company.

earnings per share – Earnings per share is the company’s earnings per share in the last quarter. It is mandatory for all public companies to publish the quarterly report that establishes the profit per share of the company. This is perhaps the most important factor in deciding the health of any company and influences the buying trend in the market that results in the price of that particular stock rising. Therefore, if you want to make a profitable investment, you should keep an eye on the quarterly reports that companies issue and analyze the possibilities before buying shares of specific stocks.

Price/earnings ratio – The price/earnings ratio or P/E ratio gives you a clear picture of how a company’s stock price compares to its earnings. If the share price is much lower than the company’s earnings, the stock is undervalued and has the potential to go up in the near future. On the other hand, if the price is much higher than the firm’s actual earnings and then the Values it is said to be overvalued and the price may drop at any time.

Before I wrap up this discussion of stock prices, let me remind you that there are many other reasons behind stock prices falling or rising. Especially there are stock-specific factors that also play their role in the stock price. Therefore, it is always important that you do your research and trade stocks based on your research and the information you get from your broker. Therefore, to benefit from effective consulting service, it is always better to go to professional securities trading firms than to be lured by discount brokerage ads that you should come across every day.