Why Share Price is Not Important while Buying Stocks?
4 months ago
Dear Reader,Why is a stock that cost Rs. 50 cheaper than another stock priced at Rs. 10?This question opens a point that often confuses beginning investors: The per-share price of a stock is thought to convey some sense of value relative to other stocks. Nothing could be farther from the truth.In fact, except for its use in some calculations, the per-share price is virtually meaningless to investors doing fundamental analysis. If you follow the technical analysis route to stock selection, it’s a different story, but for now let’s stick with fundamental analysis.The reason we aren’t concerned with per-share price is that it is always changing and, since each company has a different number of outstanding shares, it doesn’t give us a clue to the value of the company. For that number, we need the market capitalization or market cap number.The market cap is found by multiplying the per-share price times the total number of outstanding shares. This number gives you the total value of th
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