I have seen so many stocks gap up opening after announcing the results on previous evening after market hours. Here my doubt is the ‘gap up open’ is because of huge buying of the stock during 9am to 9 15 am or is the profit added to the shareholders equity or to reserves or something like this. Please give some pointers on this. And how the profit is affecting the share value.
Hi @Mani_Kanta,
The gap up opening is because of the huge demand and the high buying price placed by buyers in pre market session.
Profit is never added to stock price directly. Various methods by which the company rewards share holders include dividend, bonus shares, buy back etc.
Also, note that a good profit alone does not guarantee a positive share price movement next day. There are many other factors like operational efficiency, future prospects, relative performance to peer companies, relative performance to previous FY, presence of exceptional items … the list goes on.
Try to read the complete material provided in varsity and refer other sources as well regarding analyzing a company performance based on P&L and balance sheet.
Hope this helps.