Stock trades are arbitrary. The price can fluctuate to whatever the market is willing to pay - with no check.
Not quite true. There are some checks, especially if the price gets too low. These keep the prices level in the long term:
1. Mergers and Acquisitions, especially for cash
2. Dividends
3. Share repurchases
4. Spinoffs
5. Issuing new shares drags the price down.
There could be more, but that's the gist of it. If you can predict these events before they happen, especially for a cheap stock, you're in business.
Often a company's assets, cash flow, and earnings are predictors of these events. If the price gets below a certain level of sustainable cash flow and earnings plus liquid assets, there will be share repurchases, spinoffs, or M&A.
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