Share Price Follows Earnings Trend
Many times I have heard of people telling me that stock market investing is just like gambling, you do not know where the stock price will trade in future.
That is definitely not true. Stock market is predictable to a certain probability.
In the past 15 years, I have read countless books on investing. The books teach to buy stocks that are low PE (price earnings ratio), low PB (price to book ratio), generating huge free cashflow or low debt to equity etc. All these are important but not the most important.
The most important criteria (in my view) in stock investment is investing into companies that generates consistent growth in earnings & trading at reasonable valuation.
The stocks mentioned below (Alphabet, Disney, Tencent) have been generating growth in earnings for past many years. And it is not surprising that their share price has been rising in past years. With their earnings expect to grow in future years, their share prices should continue uptrend.
The last two bars in the charts below indicate projected earnings. Projection indicates that earnings will be higher in future for Alphabet, Disney and Tencent.
That is definitely not true. Stock market is predictable to a certain probability.
In the past 15 years, I have read countless books on investing. The books teach to buy stocks that are low PE (price earnings ratio), low PB (price to book ratio), generating huge free cashflow or low debt to equity etc. All these are important but not the most important.
The most important criteria (in my view) in stock investment is investing into companies that generates consistent growth in earnings & trading at reasonable valuation.
The stocks mentioned below (Alphabet, Disney, Tencent) have been generating growth in earnings for past many years. And it is not surprising that their share price has been rising in past years. With their earnings expect to grow in future years, their share prices should continue uptrend.
The last two bars in the charts below indicate projected earnings. Projection indicates that earnings will be higher in future for Alphabet, Disney and Tencent.
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