What Causes Stock Prices To Increase?
All Investors hope that every stock that they buy will increase in price. But few investors understand much about what would cause a stock price to increase. Mathematically, we can divide all stock price changes into just two categories: 1. A stock’s price can change because its multiple(s) change. This means that stock traders change their view of what a stock is worth without any underlying change in the stocks achieved revenues or earnings. For example the (trailing) P/E ratio or multiple changes, or the Price to Book value ratio changes. Generally this means that the outlook for future earnings has become more positive or more negative or the required rate of return on the stock has changed. 2. A stock’s fundamentals change as a result of releasing updated financial data. For example the stock’s book value, trailing 12 months revenue or trailing 12 month’s earnings changes when it releases financial performance for the latest quarter. Category 1 (multiple changes) are responsible f
