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Check this.

The market cap of this company is not even close to other companies with the same CMP, let alone the fundamentals.

And It manufactures a variety of heavy equipment, such as that used for earth moving, transport and mining, because od the pendemic the majority of it's work is shut.

And the CMP just came to half of 52 weeks high.

How the market price of a stock is set up?

How can even, a barely functioning company can keep the CMP that high?

Pardon me, if I'm asking the wrong question?

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  • 1
    Future earnings; TINA investing; greater fool theory Jul 1, 2020 at 10:14
  • Another one for the list ... sentiment.
    – Lawrence
    Jul 2, 2020 at 16:33
  • In case anyone else is as confused as I was: CMP = current market price.
    – nanoman
    Aug 4, 2020 at 22:56

2 Answers 2

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There are two common reasons why a stock price would go up when a company doesn't appear to be profitable:-

  • Expectation of something good. The company is not profitable now because it is putting all its income into growing the business. It may be hugely successful in the future. Amazon made no profit for years, but now it is a massive multinational business. The people now investing in Tesla must be thinking the same is going to happen to that company.
  • Things aren't so bad. If things are looking bad for a company, the price goes down. Even the expectation of a troubled future can push down the stock price. If the bad news turns out not be as bad as expected, the price recovers.
-1

Greed, scam, overvaluation and Gordon Gekko. No one knows what is correct value of a stock and no one can explain what drives prices. In its most basic form it's good old gambling.

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  • Humanity puts arguably more collective effort into short-term securities than literally any other endeavor, and this in no way answers the question. Sep 26, 2020 at 3:57

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