The share price of a company moves up when it reports a good quarter. This is because investors expect that the company will become more profitable in the future. The same cannot be said for companies that do not make much money. Although a rising stock price means that the company will likely become profitable, it is not necessarily the case.
A company’s share price depends on a combination of fundamental and technical factors. Technical factors affect the price of a company’s stock by altering the demand and supply of that stock. Both of these factors are affected by economic growth, which directly or indirectly affects earnings. Another big technical driver is inflation. Historically, high inflation is correlated with higher valuations, and low inflation has the opposite effect. Deflation, on the other hand, indicates that a company is losing pricing power.
