Question

Understanding Earnings per Share and Stock Prices. The Following is an excerpt from an earnings release...

Understanding Earnings per Share and Stock Prices.

The Following is an excerpt from an earnings release of Apple Inc., the maker of iMac, iPod, iPad and iPhone products, related to the results of its operations for the first quarter of fiscal year 2016.

CUPERTINO, California — January 26, 2016 — Apple today announced financial results for its fiscal 2016 first quarter ended December 26, 2015. The Company posted record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, or $3.28 per diluted share. These results compare to revenue of $74.6 billion and net income of $18 billion, or $3.06 per diluted share, in the year-ago quarter. Gross margin was 40.1 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.

Despite the increase in Apple's revenues and earnings over the same quarter of the prevoiusyear, its shares fell from US$97.34 on January 29, 2016, to US$96.43 on February 1, 2016.

Required:

Explain why the price per share decreased even though the company announced an increase in its earnings per share.

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Answer #1

Increse/ decrease of share price depends on Past financial information and future prospectous of the company. it may be possible that investors is having the information through any sources which may effect the company growth in downside.  

it can be reason of decrease of share price even after declaration of good result .

Other Reason can be result are better due to one time adjsutments done in results which wont be contine in future annd if we remove this effect tehn result could have been been downside as compared to previous quarter

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