Stock Prices and Valuation

Posted by admin as shares and stocks

The value of a firm’s stock price reflects what the investors believe is a good value in comparison to its future performance. For example, If Apple Stock traded at $122.50, that means investors believe that the share price reflects firm’s future potential. Investor’s don’t necessarily “care” how Apple did 5 years ago, but rather are more concerned with how Apple is going to do in the next 5 years. You also have to take into consideration that on paper, stock price of a company  is supposed to reflect all variables that might affect its price, including newly released information, this is also known as Efficient Efficient Market Hypothesis EMH.

We will use Shares interchangeably with stocks. When you buy stocks of a firm, you are essentially buying a small portion of a corporation’s ownership. When, people but a company’s share, their overall ownership in the firm is very firm. When investors buy shares of a firm, they become it’s owners, no matter how small their ownership is.

Historical share price information can help investors in finding out how a company’s share reacted when it exceeded or failed to deliver its expectations. Share price history can help you in making decisions like how the stock of the corporation will respond to a trademark lawsuit or acquisition of an another company. Even though each situation is different, knowledge of a company’s historical performance in the stock market will help in making better investing conclusions.

To find out past stock quotes, you can have a service that provides you with raw data which displays corporation’s stock movements for a specified period of time, or you can have a service that provides you detailed historical stock quote movements along with news events that caused it to trend that particular direction. The service that provides detailed movements is a better alternative as it gives information that directly affects the share price.

One of the services that I found useful was “End of Data”, I found the service to provide about 15 years of past share quotes, although that costs money. Yahoo Finance is a good source in finding finacial information about different companies, along with stock quotes of the company.