Even a stock of a loss making company can have higher spot price than that of a profit making company.
In trading and derivatives and daily speculation, anything is possible irrespective of balance sheet, cash flows and profit and loss statements.
More buyers will up the price, more sellers will down the price.
The stock (Options Commodities, fixed income) markets are "auction" markets, there are bidder (buyers) and sellers (offers).. A market is the highest bidder and the lowest offering price.
Forget what they tried to teach you in the world of academia, in the real world of the markets, profits, earnings and sales are meaningless, all that matters is what people want to pay for the product or the price sellers are willing to accept.
The real money maker and the most successful traders/investors are those that can read the markets - not the analysist or chartist
Expectations can drive the price up considerably. Marijuana/ CBD companies are a great example. Very few are profitable, but some are billion dollar companies or many hundreds of millions. I dont follow pharmaceutical stocks, but I imagine that some of those are very similar. Its all about how the company is viewed as a whole.
There is no direct correlation between revenue and stock price. One company could have revenue of 100 million and have zero profit. Another company could have revenue of 100 million and have earnings per share of $3.
Earnings per share (and expected EPS in the future) is what determines stock price.
(Granted, an increase or decrease in revenue is just one of many data which goes into predicting earnings per share).
Anonymous · 3 months ago
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Because those buying the stock with less revenue are willing to pay more per share than those buying the other stock. There can be any number of reasons why someone would think that. For example: Maybe the company with less revenue is profitable and the company with higher revenue isn't. Maybe the company with less revenue is growing faster. Maybe the two companies are in different industries and the company with less revenue happens to be in an industry that tends to trade at a higher multiple.