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In theory they should want that, but if the company spends money on preparing for the future and its profits decline as a result, then the share price drops. Th
by TazeTSchnitzel 7y ago
In theory they should want that, but if the company spends money on preparing for the future and its profits decline as a result, then the share price drops. The incentives aren't there.
- sokoloff 7y agoIf short term profit drops but the consensus DCF of future activities rises, the share price is likely to go up. (That’s where preparing for the future creates shareholder value.) On the other side, it happens all the time that a company has a single blowout quarter and the shares fall.
- nradov 7y agoAmazon would appear to be a strong counter example. Investors are happy to tolerate low short-term profits as long as management has a credible plan to increase long-term profits.