What Determins if a Company is a "Good" Company?

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Bullz n Bearz

One of my theories to determine if a company on stock exchange is good is: Current Price.

If say Apple is at 120.00, that must mean there has been high demand for the stock(and Apple's products). If people are willing to pay 120.00 for a share, that must mean it is financially good, right?

What do you all think about this theory? Does it have merit?
 
You're partially correct. It's the "trend of the current price" that affects people's attitudes and sentiment towards a stock. Rising prices bring about optimism. Falling prices bring about pessimism. As a stock rallies higher and higher, the equity of those investors increases as well as the appearance that the company is "good" and "well-managed".
 
Quote from nazzdack:

You're partially correct. It's the "trend of the current price" that affects people's attitudes and sentiment towards a stock. Rising prices bring about optimism. Falling prices bring about pessimism. As a stock rallies higher and higher, the equity of those investors increases as well as the appearance that the company is "good" and "well-managed.
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I really like how you explained your response very much. Definatly an additional point that I realize now that you brought it up.
 
Well you cant just look at price, you have to look at market cap relative to the competition.

Of course a "good" solid company doesn't always make a good stock.

MSFT is a good company but its going to be a while before a 300 billion company is worth 600 bill.

Although a "good" 300 million dollar company certainly could double in a relatively short period of time.
 
Quote from ang_99:

Well you cant just look at price, you have to look at market cap relative to the competition.

Of course a "good" solid company doesn't always make a good stock.

MSFT is a good company but its going to be a while before a 300 billion company is worth 600 bill.

Although a "good" 300 million dollar company certainly could double in a relatively short period of time.
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I know this is your opinion, however, I do still believe that price is a strong determinant to a company's financial health.

Could you be more specific when you say "look at market cap relative to the competition"?

Does large cap necessarily mean more volatility to a stock's price?
 
Quote from Bullz n Bearz:

One of my theories to determine if a company on stock exchange is good is: Current Price.

If say Apple is at 120.00, that must mean there has been high demand for the stock(and Apple's products). If people are willing to pay 120.00 for a share, that must mean it is financially good, right?

What do you all think about this theory? Does it have merit?
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What's with the noob questions today? Read some basis stocks/market/fianance books it will help you alot. This is really basisc stuff you are asking.
 
Quote from wucah:

What's with the noob questions today? Read some basis stocks/market/fianance books it will help you alot. This is really basisc stuff you are asking.
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wucah, I'd rather not though. I value the opinions and thoughts from ET members. I have tons of books. I like the " in the moment' style discussions that take place here on ET. Thanks though.

Nothing is wrong with asking questions that may seem "too basic" for your mind. We all learn on different levels.
 
Going just by current stock price could prove to be a very bad idea if we ever hit a bear market again.

Just remember that MSTR (MicroStrategy) got to something like $350 a share - then lost almost half in a day and went on to loose something like 90+% before it was done falling. Also, QCOM hit something like $800 a share at one time. Other stocks like LU, NT and ENR (Enron) hit numbers like $80-$150 before falling below $2.

I think it is easy to think alot of companies are good when the market is up almost every day. When a big correction comes however, it may become clear that some companies aren't what people thought they were. I would offer up DECK as a possible $100+ stock that could drop alot if a correction ever comes.

JJacksET4
 
Quote from Bullz n Bearz:

What do you all think about this theory? Does it have merit?
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You do know this isn't "your" theory, right?

It's pretty asine to just look at the stock price without normalizing it by something - say, earnings for example. Price/Earning (look: PE Ratio!) is the market's belief of the discounted future earnings of the firm.

In the scheme of things, I think you just discovered that a round stone object can be used as a wheel...
 
Sorry but price doesn't mean anything, it has no value whatsoever in determining a company's value (other than maybe an impact on liquidity e.g. a BRK.A stock at 110k is not as easily trader as a 10$ stock)
 
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