What does the price of a share mean? Back to list

Member SinceJul 08, 2021

Posts 214

Kihn

Nov 18, 2021 a 12:07
The popular saying goes, "Don't judge a book by its cover." This is true. The following truism should guide all investors: "Don't judge a stock by its share price." Many people make the mistake of assuming that a stock with a low dollar price is cheap, and one with a higher dollar price is expensive, and vice versa. The price of a stock tells us little about its value. Furthermore, it provides no indication as to whether the stock will rise or fall in the future. The cheapest stocks, also known as penny stocks, carry the highest risk. In addition to the share price of a company's stock, many other factors need to be considered. Stock prices reflect a stock's current market value for both buyers and sellers. Stocks may have an intrinsic value that is higher or lower than their current market price. As an investor, one must first identify companies that are undervalued by the market. At least on the surface, some of these considerations seem intuitive. The company has developed a technology, product, or service that has the potential to change the world. An organization is laying off employees and closing divisions to reduce costs. What stock would you recommend investing in? You may be pleasantly surprised. It pays to dig a little deeper. It may or may not be possible for that game-changing company to build on its initial success. Markets have already priced in the value of that game-changing product. It better be working on something exciting at the moment. If it is successful, the company that is cutting costs may be able to resurrect its fortunes. The herd may have abandoned it prematurely. We are looking for stocks that are undervalued, which means their current price does not reflect their true value, and then we sell them.

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