How to determine the market value of a share

Upon receipt of the shares on the stock market, its actual price can differ from the nominal, and in the direction of increase or decrease. This can contribute to a variety of factors: the way chosen by the company to issue shares (on their own, through a credit institution), as far as is known, this company and others.

After initial placement, and fulfillment by the action of any transaction it enters the secondary market, where its price will depend on investors ' expectations of dividends based on the financial situation of the company, decisions on dividends, the risks of the firm) and market conditions (inflation and Bank interest, demand and supply in the market, the situation in the economy as a whole).

Market price of the share is called its rate. There are several methods for its determination. The most common is cost. It is based on the evaluation of the company using its net assets, i.e. the value of the assets less liabilities attributable to one share. In other words, the calculated net assets of the company that are divided by the number of shares outstanding.

Income method of determining market value of the shares is based on the principle that today's property value is determined by the future receipts, calculated on the date. To calculate the value of stock used the formula: PV=S/(1+r) n where PV is the current value of the stock, S is the value of the shares, which is planned for the future, r is the interest rate of such financial asset, n is the number of periods (month, year).

The comparative approach involves the use of three methods of determining the market value of the shares. Method of similar companies is based on the comparison of company performance with those of other companies whose shares are traded on the market. This takes into account such indicators as the ratio of price to revenue, taxable income, cash flow, book value.

Method of transactions focused on the price of the business or acquisition of a controlling stake in General. The method of branch coefficients based on the relationship of price and other parameters, characteristic for the given branch, for example, the number of hotel rooms, capacity of transport, etc. these coefficients are determined on the basis of statistical observations of the relationship between the price of capital, firms and production and financial indicators.