I received an email from one of the reader which I thought it was interesting to share and further ponder around on the topic.
He asked me a very beginner question because he is relatively new to the market.
He asked me whether a share price might stay the same after 10 years even if the company continues making profits in that 10 years.
Logically speaking, if the company continues making profit, the share price should grow in tandem after 10 years, assuming everything else constant. It is almost illogical that the share price continues to be the same after 10 years.
The Efficient Market Hypothesis that we learnt in school taught us that markets are efficient. They reflect all new public information as well as the revised numbers announced after results. This means that if the company continues to make a profit, then the profits would flow back to ......