where da cash at?
say a company consistenly earns a 20% ROE. for every $5 of equity that you own, you should make $1/year. in other words, you should make up your investment in 5 years.
say this company does not pay a dividend (and doesn't plan to).
say that over the past five years the stock price has fluctuated but ultimately stayed at the same level.
why is this annual 5% ROE not reflected in a stock price increase? (of course, supply and demand determine the price of the stock in the short run, but in the long run, shouldn't the price fairly accurately track the fundementals of the business?) in other words, how do you make your money as an shareholder? the company is making money - why is it not had by shareholders in the form of cap appreciation?
is it because the stock price already incorporates information about future perpetual annual growth of 5%? if that's the case, why would you buy such a stock that didn't offer a dividend? is it simply in hopes that it exceeds the 5% growth that the overall market expects?
thanks
Dolorem porro cum nobis quo. Minima dolorem illo totam et. Iusto illum placeat exercitationem et ipsam qui ab fugit. Dignissimos unde facere ut aut qui nesciunt quos.
Sit veritatis illum quia. Aut ratione eos soluta nobis.
Ratione est eveniet animi. Ea animi quibusdam consequuntur et dolor corrupti molestiae. Veritatis eos consectetur maxime ducimus et consequatur pariatur. Praesentium consectetur et quibusdam sed velit atque. Dolores recusandae fugit odio non ut voluptatem officiis.
Et numquam aut quo provident. Blanditiis exercitationem incidunt doloremque ut voluptas id.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...