Member-only story
Book Value VS Market Value: How to Pick Stocks
While there are many determining factors that investors use to value a company’s stock, book value and market value are most commonly used to evaluate a company.
The two have very little in common but are used by investors to determine if a stock is undervalued or overvalued.
In this article, we’ll go over both market and book value, how they differ from one another, and how investors use the two metrics to determine their investments.
What is Book Value?
According to Business Insider, “Calculated from a company’s balance sheet, it takes all the company’s assets — physical things of value, from inventory and investments to equipment and real estate then subtracts intangible assets and liabilities.”
Essentially, investors will use this to determine how much the company will pay their shareholders after they paid off all their liabilities.
The value is literally determined from its company’s books or balance sheet once liabilities are subtracted.
It can be useful to investors to determine the company’s growth according to their balance sheet.
What is Market Value?
According to Market Value, “The market value of a company is calculated by multiplying the current…