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Originally Posted by glatt
I like Google. I "value" the company. But I sure don't understand how the market determines the price. Yeah, I know. The market is what someone is willing to pay. But look at the numbers.
Google reports that for each share, there was a $1.29 profit for the last quarter. Good news. Better than expected. Wall Street expected a $.78 profit. That's $.51 more per share than was expected. The stock should go up a bit as a result. I would expect the stock to go up $.51 per share plus there would be a little bounce because people might think that since Google was surprisingly profitable this quarter it will always be that way. But the stock has gone up about $30-40 in the week since the news was announced. How do you get $30-40 out of $.51?? Google would have to keep up that profit for 80 quarters, or 20 years to justify that increase in share price. Google is good. But it's not that good.
Obviously, everyone on Wall Street disagrees with me, because the price is what it is.
I don't get it.
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I remember reading in Barrons, a long time ago, there is(or was) an accepted formula for determining the stocks value. From that you could buy undervalued and avoid overvalued stocks. Except when your cousins, mistresses, bookies, shoe shine boy had an inside tip, of course.
