Shareholder return - Capital gains

4 important questions on Shareholder return - Capital gains

What is for young growth companies often the only way to offer positive shareholder return to its investors? And why?

Capital gain as growth companies usually don't distribute dividends yet. Instead, companies need cash to invest into their growth.

On what are share prices based on? Why are share prices of growth companies so volatile?

On future (expected) earnings and dividends.

Because the share price is based on future (expected) earnings rather than an actually existing (and tested) dividend policy.

Market expectations and hence the share price can change fast.

  1. Competitive dynamics
  2. A change in the economic outlook
  3. Regulatory adjustments that could affect a whole sector or industry
  4. Changes in management confidence and perceived execution challenges
  5. Surprises in the company's performance vs earlier market expectations   
  • Higher grades + faster learning
  • Never study anything twice
  • 100% sure, 100% understanding
Discover Study Smart

As shares trade, how are share prices constantly adjusted?

By the buyers and sellers who take actions on the basis of incremental changes in expectations.

The question on the page originate from the summary of the following study material:

  • A unique study and practice tool
  • Never study anything twice again
  • Get the grades you hope for
  • 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
Trustpilot Logo