What Determines Stock Price? [5 Must-Watch Factors]

What determines stock price is one of the most important but also misunderstood questions from beginner investors. The answer will not only make you a better investor but you’ll be able to forecast where stock prices are going.

With nearly 200,000 in the Let’s Talk Money community and 7,000+ in our Facebook community, I get a lot of beginner investing questions. One of the most frequent, and most important, is just, “What determines stock price?”

And the surprise comes when you realize, stock price has very little to do with whether a stock is a good investment or not.

In this video, I’ll explain stock prices and show you how the stock price is calculated. I’ll use real-world examples and reveal five factors that determine a stock price and how you can use them to understand where a stock is going, up or down.

You see, the stock price is simply the market value of a company divided by the number of shares available. It’s how much investors are willing to pay and how many investors there are in the stock. That’s it! A low stock price doesn’t mean a stock is inexpensive or a bad company. A high stock price doesn’t mean it’s expensive or a good company.

Once you understand how a stock price is calculated, you can start looking at the real factors that determine the price. These include financials and profits within the company, headlines, industry trends and how the company stacks up against competitors. I’ll show you where to find each of these factors, how to use them and how to tell if the stock price is going up or down.

0:00 What Determines Stock Price?
1:16 What is Stock Price?
1:30 Stock Price Example
1:59 How is Stock Price Calculated?
2:49 Factors that Determine Stock Price

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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