Those investing in stocks market always wonder differences between the stock prices and their value. After, sometime, you will know that stock’s value or price is different in its measures and its means.
The perfect example that can best illustrate that difference is the real estate collapse of 2008. During that time, many houses have had value coming from the appraisals or other means. Thus, it sold for a very little amount of money, since that is the price that the market wanted to pay.
Factors Determine the Stock Value
Within the stock market, the investor normally decides the stock’s value by looking at the following factors.
- Market Share
- Its Earning (Including the past, present, and the future projection)
- Its Potential and Current competitors
- Its sales volume over time
- Various metrics (like price per earnings ratio, etc.)
- Reports from analysts about the company
These factors, mostly, provide a straightforward analysis derived from figures and data. However, there are chances for people to interpret it in a different way.
For instance, there is a company that ventures into a new business sector, through an acquisition or merger. This company has the chance to experience financial failure, regardless of the good image it has on the paper.
Because of that reason, a career stock market analyst can have a good salary. These are the people who sort out the figures and facts of those companies to find the possibilities of success or failures.
Factors Determine the Stock Prices
Oftentimes, the stock price fall around the estimated value from analysts. Except when there is a daily fluctuation due to rising or falling markets.
Yet, there are many occasions when this stock price can be different from its value. A stock price represents the number of the seller who wants to sell and the number of buyers who wants to buy it at an agreed price.
In other words, the stock actual value comes from the value someone wants to pay. Other than that, there are also fundamental factors that influence the stock price in the long term. These are the fundamental factors that affect the stock price.
- Overall market trends
- Economy
- News, the good or the bad
- Company’s news, like its earnings, scandals, or financial issue
- Its confidence in the economy
In short, traders will be more concern about the stock price fluctuation, meanwhile, investors will be more concern about the stock value.
