What Factors Influence the Value of Common Stock?

A number of factors can affect the performance of a company's common stock.

Common stocks are securities that represent an equity share of a corporation. Common stock shares entitle the holder to a share of the companies profits and success either through stock dividends or through an increase in the value of the stock.

Profits

Corporate profits or losses have a strong influence on the value of a company's common stock. If a company is profitable, the stock price often remains stable or increases. If a company posts a loss, the stock prices often fall.

Market Share

The share of a particular market often affects the value of common stock. For example, if a company increases its share of the available market, thereby increasing its potential customer base, its stock price probably will rise. If it loses substantial market share to a competitor, the price may fall.

New Products

A company that frequently introduces new products may experience an increase in the value of its common stock. This often results from increased consumer interest in the company.

Targets

Financial analysts set certain expectations for larger corporations. These expectations are built in to the price of common stock shares. If a company exceeds analyst expectations, the value of the shares often rises. If the company fails to meet expectations, share prices often fall.

References

• Investor Words: Common Stock
• Day Trading: What Factors Influence the Value of Common Stock?
• How the Market Works: What Affects Stock Prices?