Expert: Paul Henneman - 2/2/2008

Question
How is it that Exxon reports a record breaking profit and yet the stock goes down .   Also, what is difference between YTD return and yield.
Thank-you

Answer
Sue,
   Thank you for your question!
I'll answer the second part of your question first. The YTD return is the year to date percentage return of the stock price. Yield typically refers to the dividend payout of a stock. Not all stocks issue a dividend, but for those that do it represents an additional source of profits for the investor. Typically large, profitable companies that are not looking for fast growth issue dividends. For example, a stock that trades at $10 and offers a dividend of $1 has a yield of 10%.
   The first part of your question is fairly complex. To reduce this to as simple a level as possible given the amount of space I have here, you are right that usually a record breaking year would tend to drive the stock price up. However, things that can interfere with that are the state of the stock market as a whole (it has been a VERY tough month for the market), and the state of the industry that company resides in. Also, investors may have been expecting the strong profits, and so the stock price had already reflected this. Then when the market tumbled in value, it tends to bring most stocks with it, including companies with strong profits.
   That said, this could mean that there is a buying opportunity at this price level for Exxon. My companies analysis is just that, and has a buy rating at this price for Exxon. Of course this is based on the expectation that strong profits continue, if profits cannot be maintained at this level, then the valuation would fall accordingly.

I hope that this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com