Before you invest in the stock market, you need to learn the basic terms and how the stock market works. For example, you should know the PPS meaning in finance as it relates to stocks and shares. It will help you determine whether company stock is worth considering or not.
PPS Meaning in Finance
PPS in stock market terms is an acronym for price per share. It is commonly referred to as the market price per share. It is the most recent price at which the share of company stock has sold for within a given stock market exchange.
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PPS from a Seller’s Perspective
The price per share is the lowest price at which a seller is willing to let go of their shares within the stock market. If someone offers less than this price, the prospective buyer is unlikely to acquire the stock they want.
PPS from a Buyer’s Perspective
The price per share is the maximum price at which the buyer is willing to pay to acquire shares of a company's stock. Most would like to pay less, but none would be willing to pay more than that price per share.
Law of Supply and Demand
If there is an increase in demand for a particular stock and many people want to buy it, the price per share will increase. That may be as a result of the investors holding onto their shares hoping that the increased demand for them will push the prices up further so their returns will be higher.
On the other hand, if the demand for a particular company stock is low, and there are fewer buyers for the huge supply available within the market exchange, the price will fall. In such cases, the buyers may quickly dump their shares as they try to minimize losses stemming from reducing prices.
Meanwhile, the potential buyers may adopt a wait-and-see attitude in the hopes that the share prices will fall further. That way, they can acquire the company stock for a much cheaper price.
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Factors Affecting PPS in the Stock Market
The law of supply and demand of a company's stock does not occur in a vacuum. Usually, situations tend to occur to influence investors' behavior, which affects the supply and demand for the stocks they hold. In turn, that affects the price per share.
Below are some of the factors that affect PPS in stock markets.
- Stock buyback programs that reduce supply for the stocks being bought
- Income, dividend and cash flow reports issued to the public that indicate the performance and health of the company in question
- The appointment or removal of company leaders whose performances may be positive or negative
- Scandals concerning a company that may make investors wonder whether it will survive or fail
- The national and global economy – if it is in turmoil, people may sell in panic and reduce the market share price of many company stocks
- News concerning a company that may influence the investors’ perception for the better or worse
- Fraudulent trades by company insiders or their affiliates in an effort to irregularly increase share prices for a few people in on the plan.
While the price per share of a company stock does not give the entire picture because it is subject to public perception, it is still useful. You can use it to calculate the market value of a company by multiplying it by the number of shares outstanding, and the result gives you an idea of what the value of the company is within the market. If you were to buy out the public investors at any given time, that would be the value of the money you would have to pay them.
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