Hello, I'm new to the forum and I just had a couple quick questions for yall:
I was wondering how a company's stock price is determined? For instance, why would a company's stock be at 6$/share as opposed to $60, $160, $600, $16000?
Also, what is the significance of the P/E ratio?
Right now I am just trading for my Roth Ira on Etrade. I was wondering what yall do for trading? Each time I want to buy shares it costs me 9.99 and when I sell their commission is 7.99 I think.
Thanks in advance for any insight and advice!
-Chas
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Stock price is determined by many things such as the number of shares outstanding, growth of the business, profitability of the business, industry of the business, what the market will handle for the price, along with many other things.
P/E is how much you are willing to pay for a stock's earnings.
I use ETrade too. There are places that are more expensive and places that are less expensive. My last purchase with them, the commission was $6.95 for a purchase. I also have Loyal3 and their commissions are $0 for buys and sells.
Oh and welcome to the forum. Post something about yourself in the Introduce Yourself.
Let's say you have a house worth 100,000 dollars. Suppose 10 of us wanted to become equal owners of this house. If each one of us recieved one "share" to represent our ownership of this house, then a single share would cost 10,000 dollars. If instead of 1 share per owner, suppose we give each owner 10 shares for a total of 100 shares in total. Each share of this house would now be worth 1,000 dollars. Basically, the total value of the company divided by the number of outstanding shares should equal the price of a share. The question becomes what is the correct total value of a company. This is where P/E ratios come into the picture. A common way to estimate a companies value is with current company earning and expected future growth. A trailing 12 month p/e compares the actual company earnings over the past year versus the current share price. For low growth companies, you would expect a p/e between 10 and 20. For high growth companies it will usually be higher.
Thanks for the help everyone. I just joined the wait list for Loyal3. Must be good if there's a waiting list haha. If/when minimum wage increases I'm going to be buying some MickeyD stocks
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