CompanyGraph
Price and fundamentals operate on different clocks. Divergence is a question to investigate, not a promise that one will catch the other.
What is price–fundamental divergence?
Define the price measure, fundamental line, direction, and period. Rising price with falling revenue is different from falling price with improving free cash flow.
Why can price lead fundamentals?
Markets can anticipate recovery, regulation, products, financing, or takeover outcomes before annual statements record them. Expectations can also be wrong.
Why can fundamentals lead price?
Reporting lags, low attention, illiquidity, forced selling, and valuation compression can delay price response. Strong accounts do not guarantee a catalyst.
How do you build a divergence screen?
Choose one price condition and one economically related fundamental condition with compatible windows. Avoid piling on correlated indicators. Recheck splits, currency, acquisitions, disposals, and restatements.
Price Above Long-Run SMA Despite Earnings Decline
Fast SMA sits above slow SMA while net income decreased year-over-year and total assets decreased year-over-year
One worked direction: the price trend is up while net income and total assets decline year-over-year.
Fast SMA Below Slow SMA With Profitability
Fast SMA below slow SMA alongside three years of profitability and elevated cash-flow margin
The mirrored direction: the price trend is down while profitability and cash margin hold. Neither match predicts convergence, timing, or return.
What evidence resolves the disagreement?
Read filings, events, segments, cash flow, debt, and valuation assumptions. The SEC's Form 10-K guide identifies business, risk, management-discussion, and audited-statement sections.
Why does divergence require a custom pair?
Divergence has multiple directions that no single panel should collapse; the two panels above are one direction each. Use topic-specific CompanyGraph technical and fundamental observations after defining the exact pair. No match predicts convergence, timing, or return.