#Pharmaceutical #market #share
What Is the Market Price Per Share?
The market price per share of stock — usually termed simply share price — is simply the dollar amount that investors are willing to pay for one share of the company s stock. It has no specific relation to the value of the company s assets, such as book value per share, which is based on the information from a company s balance sheet.
Calculation of Market Price Per Share
You do not have to calculate the current market price per share; it s the figure that appears when you go online and ask to see a company s current share price.
To determine the share price online as of any given date, put in the company s stock symbol — for Apple, for instance, it s AAPL — and the phrase share price. Most Internet pages showing current share price — including all online brokerage sites — also allow you to find the share price on any given past date.
A related data point is the company s Market value — the overall value investors assign to a company on a given date. You determine that value by multiplying the market price per share by the number of shares outstanding. Not all Internet stock-market sites show the number of outstanding shares for each company, although many do. Otherwise, you can find the number of shares outstanding in the company s 10-K report — the less glossy, more detailed and SEC required version of the company s annual report.
The Difference Between Market Price and Book Value
Investors new to the market sometimes confuse the stock s share price with the company s book value.
The book value, or net asset value, is determined by adding up the company s assets and subtracting its liabilities. Both values appear on the company s balance sheet and/or annual report. In theory, this is the value the company would have if it were broken up into its constituents and sold.
In almost all cases, the book value will be significantly less than the market price because the market price takes into account both the company s current profitability and estimates of future profitability.
It reflects not just the value of the company s assets, but an estimation of the company s ability to use those assets to earn a profit.
While, in theory, the book value is the net value of the company s total assets, in practice the value of these assets will differ from book value in the event of an actual liquidation. One reason for the discrepancy is that the book value calculation depreciates assets according to recognized accounting practices, which cannot take into account the fact that an asset may sell for much more than its depreciated value — real estate in a rising market, for instance — or may sell for much less — if, for example, its manufacturing equipment is no longer widely used.
Another reason why book value may not accurately reflect the real break-up value of a company is that it is standard accounting practice to determine book value by subtracting from a company s total asset value all its intangible assets.
For example, if a pharmaceutical company has total assets of $ 1B that include patents valued at $200M, the book value becomes $800M. But, in reality, those patents may be the most valuable assets the company owns. In that case, the book value may be much less than the actual break-up value of the company.