When a stock price suddenly goes up, we often think the company must be doing very well. But I think the real question is, how much of that good news is already reflected in the stock price?

Suppose a company is growing its revenue and profit. That is obviously a positive sign. But if the market already expects this company to grow very fast in the coming years, those expectations can already be built into the current valuation.

So even when the company is doing well, the stock may not always be cheap.

For me, this is why looking only at price is not enough. I want to understand the company’s actual growth, profit, future potential and then compare those things with its current valuation.

A strong company can still be an expensive stock. That’s why I think good stock research is not only about finding a good company, but also understanding whether the current price makes sense. 📈

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