As a relatively new student to the market, and as someone who would inherently define himself as a value investor, I can't help but feel that current market conditions beg the question: do fundamentals matter anymore in the market?
With the advent of the internet markets have been going sideways for nearly two decades. I have seen companies with already low multiples report higher earnings, appreciable earnings growth and yet somehow end up with lower multiples as the stock stagnates sideways. Gains made through earnings growth appear to be offset by PE shrinkage. That is, rather than a stock increasing in price for reporting strong earnings to at least maintain its PE, the stock price stays flat and the PE drops.
Correct me if I'm wrong, but if low multiples imply an expectation of poor prospects, how can a stock remain at those low (and even shrinking) multiples if fundamentals keep improving? Given supply and demand of markets, theoretically equilibrium price could stay the same, regardless of any fundamentals. One can only sell for a higher price if someone else is willing to pay for it, and it seems like there aren't many people paying for the fundamentals. It's almost the thought process of "if the stock is trending down, why do I care that they made $X more than last year".
So, are there still people buying on fundamentals? Do they matter anymore?
Assume things like margins, shares outstanding remain the same and there are no other notable changes besides growth in earnings and revenue. Assume a healthy balance sheet as well.
All opinions and answers are welcome! Thanks for the discussion.