What is the major difference in Intrinsic Value between and Market Value?
In equity investing, consequently, there are two discreteconcepts of value and price. Intrinsic value is the approximate value per equity share, based on the future earning latent of a company.
Market price is the price at which the share trades in the stock market, taking into account consideringquite a fewaspectscountinga range of estimates of intrinsic value.
Intrinsic value may be =(Equal to), < (Less than), (Greater Than)> the market price at any point in time.
If the intrinsic value is supposed to be more than market value, the scrip is said to be undervalued.
If intrinsic value is supposed to be less than market value, the scrip is said to be overvalued.
The aim of investment strategy is to buy undervalued shares and sell overvalued shares.
However, it remains strong to make these evaluationsaccurately and consistently, as what is being priced is the unknown future of the company.
Equity investing requires recognizing and taking advantage of inefficiencies and is not agreeable to mathematical formulation.
Qualitative factors that measures future potential of a company based on aspects such as quality of management, marketing strategies, financing capabilities, etc make equity investing a skill as and science.
Stock markets where these approximate are made and acted upon through buying and selling of equity shares, mark a social ecosystem of intricate human behaviour. Investment choices are influenced by behavioural and cognitive boundaries of individuals acting in a group.