What is a good stock price?

Question

in todays market what is a good stock price??

Answer 1

There is a wonderful feature on most spreadsheets, it is a function to generate random numbers.

With a name like "Rebecca" I can assume you are female, so what is a good weight for a woman? Or an age for that matter.

Suppose I just had the "Prize Patrol" show up at my door and I took the cash option for their multimillion dollar prize (which at my age, the income stream wouldn't end until about 15 years after I've died). Then allowing for taxes and the usual stuff (donations to my church or other good causes, bailing a "long lost" distant relative I've never heard of out of jail because his wife was sobbing at my door the next morning, etc.) suppose I have five million dollars that I want to put into a chain of organic-meat hamburger stands. I go to that site online where I can incorporate for some piddly two or three hundred dollars and issue 5 million shares at $1 par value (following me so far?). Now the corporation has $5 million in cash and I have 5 million shares of stock. Well, now I realize that I've tied up all my spare cash in the corporation -- no matter, as CEO and Chairman of the Board of Directors, I'll pay myself a nice wage. Oh, but that nice big house I glimpsed a picture of from the gaggle of real estate agents now camped outside my door, fortunately displacing all of my supposedly long-lost relatives, requires a bit more money. So now I list my little company, um, on the Chicago Stock Exchange, where I put it up to trade.

Here is where your question comes in. What would be a good stock price?

There is where some would-be investors say, "Hmm, 5 mil in cash, but no stores, no track record, so, I'll bid 50 cents a share for a couple thousand shares, maybe more in the future if we see that it takes off."

To that person, $1 of cash per share, but no business, then 50 cents would probably be a generous bid.

Now, suppose I sketch out some snazzy little trailer that I tow to shopping center parking lots and rent the use of a distant corner to sell my burgers. These trailers with their propane grills might cost about $5k each, but then I have to stock and staff them, so suppose I allow $50k per trailer and plan for a hundred of them. Hmm, then that would wipe out my cash, so they better get to working right away or my little company will soon become insolvent.

With the news, complete with pictures of the brightly colored trailers, is ready, then the advertising agent wants money for him and the promotional plans. Well, maybe 80 trailers then. The potential investors look at the pictures and say 75 cents per share. Then they hear about my retrenching on the expansion plan, figuring that I may have over extended myself, they then start offering only 25 cents per share.

With this, the Chicago Exchange people say I no longer fit their guidelines and they delist me. So now I have to get listed among the "Pink Sheets". With that the few who have bought my shares want to sell, for 5 cents each.

Half of my burger trailers are a total flop, share price is down to a penny a share. Half of my burger trailers make money, share price is up to 3 cents.

Some enterprising people then start buying, stock price is now 5 cents a share.  But then there are these emails flooding the internet, "We have a runner!" and "Ride this rocket to $20 in two months!" Then, as those buyers see a flood of interest, they unload what they have for 20 cents a share. After that is done, no one is buying my shares, so they go back down to a penny.

Now some bigger company, like YUM Brands decides they like my concept so it is cheaper to buy me out then draw up the plans and make a competing chain. So they offer a buyout at 10 cents a share and I concede, selling my company for half a million. They fire me, spruce up things, fix what I did wrong, and launch 10,000 trailers.

When YUM decides that my trailers really aren't their "cup of tea" so to speak, they decide to spin off the company.

Now what is a good stock price?

You can bet it will be better, but that all depends on the value of the assets, the worth of the book of business, and potential for profits -- all as a factor divided by the number of shares outstanding.

Answer 2

what color makes the car go fast?  

same question. Sometimes a higher price of a stock could mean incredible returns.  Take Berkshire Hathaway.

One share sells for $118,750 and is considered cheap!

hope this answers a question that has no real answer!

Answer 3

A price that is 16 times last 12 month's earnings is par for the course. If the price is much lower, other investors are shying away from it or the market is depressed. The other investors may know things you do not, so they may feel this company will under perform.

If the price is higher than 16 times last year's earnings, other investors have high confidence in that company's earnings prospects. Now it is not uncommon for a price above 16 to be overly optimistic. Sometimes the average stock in the market is above 16 times earnings. That is not always a good time to be buying long.

Answer 4

I would recommend getting a book on stocks, or investing so that you can learn the basics of everything.

Answer 5

That question makes no sense at all.

It depends on the company and many many factors.  A stock selling at $30 might be a bargain and it might be a good strong company or you might find one selling at $200 tgat us a bargain.

The price is not a way to determine what is "good" or not.

That is like asking what a good price for a car is - without telling us what kind of car.

Answer 6

If a stock is priced lower today than you expect it to be in the future, you could consider it a good price.  The stock should also be trading at a greater discount than its peers to be considered a good price.