Market Price of Share

The price of a share of a company that is traded on the stock exchange market can be obtained by its quotation. This is the denominated value of a share on the market. In fact, this is maybe the most representative value of a share, due that it reflects at each moment what the market is willing to pay for it. The problem of accepting the quotation as the share?s real value is that the quotation varies each day due to supply and demand.

An example of the low representation that the site value has of a share is that it is usually lower to that of the market?s quotation, which is precisely what the market is willing to pay for the share. To obtain information about the price of a share, if its too high or not it is useful to compare the market value against the site value:

Relation between quotation and site value  =             quotation
             site value of the share

Usually, the previous ratio is higher than 1, due that as indicated before, the site value does not take into account part of the assets that the company has (patents, trade marks, customers, etc.). Also, the quotation incorporates the future expectations that the market has of the company. If the company has good future expectations the quotation will be better.

Anyway, a symptom that the share could be expensive is when this ratio has a value higher than 1, for example 10. However, when the value is lower than 1, it could be a symptom that the share is cheap and that it is worth buying. Anyway, we would have to see why the quotation is lower to the site value due that there could be problems of bad expectations for the company.

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