Relavent content in my book
In my book “The Rules of Super Growth Stocks Investing“, I have discussed several reasons drive stock price up:
- The entire subsection of 1-2, from pages 27 to 35, on analyzing the 3 factors to find the key to stock price rise
Five reasons
Business growth
When the company’s revenue continues to grow, the stock price will also follow the revenue, and when the company grows, the stock price will usually follow suit.
As long as the company does not go bankrupt, it will eventually make a profit, because investors will not have long patience for unprofitable listed companies, and listed companies that continue to be unprofitable will eventually end up delisting. As long as they are not delisted or go bankrupt, most (note, not all) listed companies with continuous revenue growth will of course continue to grow their earnings.
Acquisitions
Larger companies may acquire smaller companies for below-market prices. In short, even if M&A has other purposes, such as acquiring technology, eliminating rivals, expanding market share, and increasing distribution channels, the main purpose of most M&A is to increase the company’s revenue. The higher the revenue, the higher the share price.
Repurchase
If the market price of the stock is lower than the market price, the company can reduce the number of outstanding shares by repurchasing its own company’s stock, which will naturally increase the earnings per share.
Change in valuation
As the company grows and thrives, it may attract interest from Wall Street investors. Institutional investors will then announce that the ugly duckling has turned into a swan, and the company’s stock price rating will rise. An increase in the company’s stock price rating will of course attract a large number of buyers and increase the stock price.
Dividend boost
Dividends distributed by listed companies are the favorite of investors who need regular and stable cash flow. When non-profit organizations, retirees, and investors without fixed income are looking for companies to invest in, whether to distribute cash dividends and the dividend yield will be the main considerations when screening.
Related articles
- “Reasons drive stock price up“
- “The valuation influence of stock liquidity and stock split on listed companies ”
- “The significant valuation impact of diversity to listed companies“
- “Valuation methods significant different between US and Taiwan investors“
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