We look at companies whose share prices don't match their financial growth
22-Mar-2023 •Hemkesh Khattar
Here's how we want the market to function. A business performs well consistently. It is fundamentally strong. People take notice and want to purchase it. This creates demand, and thus, the stock price goes up.
Well, that's how we want it to function. But does it?
Markets, at the end of the day, are run by people. And people, indeed, are emotional beings. It is easy to make people believe in something if you paint a narrative strong enough. And this goes for stocks too.
So, since the birth of markets as we know them, hype, overoptimistic projections of earnings, and, at times, just plain stupidity have driven stock prices, tossing fundamentals and performance out of the window.
So to find present examples of such companies where the fundamentals don't match the stock price, we conducted a simple exercise. We looked for companies with poor to below-average financial growth but stellar stock market performance over the last five years.
For the above, we went to our stock screener and applied the following filters:
Here's what we found.
While what drove up the share prices of these companies is open for debate, one thing is for sure - it wasn't their performance.