How Markets and Investors value stocks Essay
How Markets and Investors value stocks
Collectively, Team B believes stock is a security that shows possession in a company or asset and symbolizes claim from investors or the owner. The market and invests are interested in two types of stocks which are common and preferred. Common stock typically gives a share of ownership in a corporation, to which gives owners and investors rights to vote or make decisions, and a right to receive dividends. Preferred stock, gives no decision-making or voting rights, but has a greater return on assets and earnings to investors than the common shares. When preferred stocks are purchased, the investor has an expectation when dividends are to be received because of the regular intervals they are paid. With common stocks, the board of directors determines if a dividend will be paid or not. When evaluating stocks, there are two key variables, which are profitability and growth (Mcconnache, 2007). Stock ownership is decided by the quantity of shares a shareowner has comparative to the quantity of outstanding shares. When appraising stocks, a valuation should include all risk, expansion plans and a strategy to diversify.
With Internet technology investors have a considerable amount of resources to measure the profitability of stocks. This technology allows investors to aggressively and vigorously searches for corporations that can provide a high return on investment. Investors should be interested in the future growth of a corporation vice only considering the present day value. New ideas should be considered a strategy when estimating the future growth and profitability of a stock cash flow (“How To Value A Stock”, 2009). The market has a tremendous effect on the value of a stock and its profitability through supply and demand. The market has the abilities to determine when to allocate resources to adjust the supply and demand. When that shift happens it regulate the increase or decrease of the stock price in the market.
The stock market can undervalue a stock for countless intention such as dividends, earnings, and sales. These intensions attract investor that anticipates purchasing stocks prior to the market snowballing the prices. When investors find it safe or feel knowledgeable about the stock or market, and understand the rules governing the market are fair, it grows at a faster pace (“How To Value A Stock”, 2009). Even through the stock market can seen intimidating, there are safeguards for investors, which are the Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD). SEC controls and develops laws and regulations that govern the securities industry and NASD manages added regulations and put in force federal securities acts. These two organizations provide investor protection and allow an even playing to all. Conclusion
Markets and investor evaluate stocks from many different perspectives before making a decision to invest. Many factors to include political, economical, social & cultural and technology influences how a stock can generate revenue for an investor. Moreover, Present Value and Future Value are also methods investors used to determine an valuations of stocks for profitability.
Mcconnache, S. (2007). How to Do A Basic Stock Evaluation. Retrieved from http://www.ezinearticles.com How to Value a Stock. (2009). Retrieved from http://www/forbes.com/2009/04/14/investingstock
Parrino, R., Kidwell, D.S., & Bates, T.W. (2012). Fundamentals of corporate finance (4th ed.). Hoboken, NJ: Wiley.