Business performance = how well the company is actually doing. Things you can look at include: Revenue — is the company making more money? Profit — is profit increasing? Debt — is the company taking on too much debt? Cash flow — is the business generating cash? Assets and liabilities Earnings per shRead more
Business performance = how well the company is actually doing.
Things you can look at include:
Revenue — is the company making more money?
Profit — is profit increasing?
Debt — is the company taking on too much debt?
Cash flow — is the business generating cash?
Assets and liabilities
Earnings per share (EPS)
Share price = the price investors are currently willing to pay for one share of the company in the stock market.
The important part
A company’s business can be performing well while its share price falls, and the opposite can also happen.
For example:
Company A’s profit increases from ₦10 billion to ₦15 billion.
That’s an improvement in business performance.
But if investors expected ₦20 billion and are disappointed, they might sell the shares, causing the share price to fall.
Conversely:
A company may currently have weak profits, but investors expect the business to improve significantly in the future.
More people may buy the shares, causing the share price to rise.
The difference is that business performance is about how the company is actually doing, while share price is what investors are currently willing to pay for the company’s shares. For example, imagine a company has 1 billion shares and makes ₦10bn profit this year. If next year its profit increases tRead more
The difference is that business performance is about how the company is actually doing, while share price is what investors are currently willing to pay for the company’s shares.
For example, imagine a company has 1 billion shares and makes ₦10bn profit this year. If next year its profit increases to ₦20bn, revenue grows and debt reduces, the business performance has improved.
But the share price doesn’t have to automatically double. It could rise, remain the same, or even fall because the market also considers investors’ expectations, interest rates, economic conditions and other factors.
For example, a stock can be trading at ₦100 even though the company is performing well, but if investors expected much better results and the company disappoints, the price could fall to ₦80.
So when analysing a stock, I don’t look at the share price alone. I look at how the business is performing and then ask whether the current share price is reasonable compared with its earnings, cash flow, debt, assets and future growth prospects.
Imagine you have a small farm where you grow tomatoes, and you want to expand your farm to grow more tomatoes and make more money. Now, let's connect this to the difference between a share price and business performance in a way even Mama Ngozi from the village can understand.So, in our story, yourRead more
Imagine you have a small farm where you grow tomatoes, and you want to expand your farm to grow more tomatoes and make more money. Now, let’s connect this to the difference between a share price and business performance in a way even Mama Ngozi from the village can understand.
So, in our story, your farm’s business performance is how well your tomatoes are growing, how many you are selling, and how much profit you are making. It’s like the overall success of your farm – if your tomatoes are healthy and selling well, your business performance is good.
On the other hand, the share price is like the value that people see in your farm. If your tomatoes are growing very well, and everyone can see that your farm is successful, more people will want to invest in your farm by buying shares. This increased demand for your farm will make the share price go up.
But here’s the twist: sometimes, the share price may go up or down for reasons that have nothing to do with how well your tomatoes are actually growing. For example, if there’s news that tomato farms might be less profitable next year, people may sell their shares in your farm, causing the share price to drop. This doesn’t mean your tomatoes suddenly became less delicious – it’s just how people perceive the future of tomato farming.
So, in summary, business performance is like the real-life success of your farm, while the share price reflects how investors perceive the value of your farm based on various factors, not just how well your tomatoes are doing. Remember, it’s essential to focus on growing those tomatoes and running your farm well, as that will have a long-term impact on your success, regardless of short-term fluctuations in share prices.
Now, do you see the difference between share price and business performance, just like understanding the health of your tomato farm compared to how others see its value?
Business performance = how well the company is actually doing. Things you can look at include: Revenue — is the company making more money? Profit — is profit increasing? Debt — is the company taking on too much debt? Cash flow — is the business generating cash? Assets and liabilities Earnings per shRead more
Business performance = how well the company is actually doing.
Things you can look at include:
Revenue — is the company making more money?
Profit — is profit increasing?
Debt — is the company taking on too much debt?
Cash flow — is the business generating cash?
Assets and liabilities
Earnings per share (EPS)
Share price = the price investors are currently willing to pay for one share of the company in the stock market.
The important part
A company’s business can be performing well while its share price falls, and the opposite can also happen.
For example:
Company A’s profit increases from ₦10 billion to ₦15 billion.
That’s an improvement in business performance.
But if investors expected ₦20 billion and are disappointed, they might sell the shares, causing the share price to fall.
Conversely:
A company may currently have weak profits, but investors expect the business to improve significantly in the future.
More people may buy the shares, causing the share price to rise.
See lessThe difference is that business performance is about how the company is actually doing, while share price is what investors are currently willing to pay for the company’s shares. For example, imagine a company has 1 billion shares and makes ₦10bn profit this year. If next year its profit increases tRead more
The difference is that business performance is about how the company is actually doing, while share price is what investors are currently willing to pay for the company’s shares.
For example, imagine a company has 1 billion shares and makes ₦10bn profit this year. If next year its profit increases to ₦20bn, revenue grows and debt reduces, the business performance has improved.
But the share price doesn’t have to automatically double. It could rise, remain the same, or even fall because the market also considers investors’ expectations, interest rates, economic conditions and other factors.
For example, a stock can be trading at ₦100 even though the company is performing well, but if investors expected much better results and the company disappoints, the price could fall to ₦80.
So when analysing a stock, I don’t look at the share price alone. I look at how the business is performing and then ask whether the current share price is reasonable compared with its earnings, cash flow, debt, assets and future growth prospects.
See lessImagine you have a small farm where you grow tomatoes, and you want to expand your farm to grow more tomatoes and make more money. Now, let's connect this to the difference between a share price and business performance in a way even Mama Ngozi from the village can understand.So, in our story, yourRead more
Imagine you have a small farm where you grow tomatoes, and you want to expand your farm to grow more tomatoes and make more money. Now, let’s connect this to the difference between a share price and business performance in a way even Mama Ngozi from the village can understand.
So, in our story, your farm’s business performance is how well your tomatoes are growing, how many you are selling, and how much profit you are making. It’s like the overall success of your farm – if your tomatoes are healthy and selling well, your business performance is good.
On the other hand, the share price is like the value that people see in your farm. If your tomatoes are growing very well, and everyone can see that your farm is successful, more people will want to invest in your farm by buying shares. This increased demand for your farm will make the share price go up.
But here’s the twist: sometimes, the share price may go up or down for reasons that have nothing to do with how well your tomatoes are actually growing. For example, if there’s news that tomato farms might be less profitable next year, people may sell their shares in your farm, causing the share price to drop. This doesn’t mean your tomatoes suddenly became less delicious – it’s just how people perceive the future of tomato farming.
So, in summary, business performance is like the real-life success of your farm, while the share price reflects how investors perceive the value of your farm based on various factors, not just how well your tomatoes are doing. Remember, it’s essential to focus on growing those tomatoes and running your farm well, as that will have a long-term impact on your success, regardless of short-term fluctuations in share prices.
Now, do you see the difference between share price and business performance, just like understanding the health of your tomato farm compared to how others see its value?
See less