The value of a stock is based on the value of the company, but why that correlation?
Only thing I can see linking them is dividend, but that is just 3-4% Annually. What is preventing it from becoming a game of share market, like happens in crypto?
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Enterprise valuation – the total value of the company – is defined as the sum the company’s debt (net of cash) and equity. The equity portion is what’s reflected in a stock price. The value of the equity is determined by several factors, the most important of which is the company’s ability to generate free cash flow or earnings (they’re different things), and the market’s expectation of their likelihood to *grow* (or shrink) those earnings. Other factors that influence equity value are things like intellectual property, and intangibles (like having exclusivity in a market). Dividends matter in some cases, but they aren’t usually a key factor in determining equity value.
What do you mean by “game of share?”
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