What Is the Difference Between Intrinsic Value and Market Value?

Consequently, there are two discrete concepts of value and price in equity investing. Intrinsic value is the approximate value per equity share based on the future earning latent of a company.

The market price is when the share trades in the stock market, considering quite a few aspects, counting the 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 the 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 investment strategy aims to buy undervalued shares and sell overvalued shares.

However, it remains strong to make these evaluations accurately 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 measure the future potential of a company based on aspects such as quality of management, marketing strategies, financing capabilities, etc., make equity investing skill and science.

Stock markets where these approximate are made and acted upon by buying and selling equity shares mark a social ecosystem of complex human behaviour. Investment choices are influenced by the behavioural and cognitive boundaries of individuals acting in a group.