How to Value a Share Price



A share price value can be determined in several ways. The share value is the price of one share of stock. The buyer of the stock is the shareholder, after the sales transaction is completed. The company, that presented the stock certificate for sale, is called the issuer. A company can issue share certificates in several ways. Usually, the corporation will declare an initial public offering, and its stock is, then, presented to the various stock markets for sale. A corporation can, also, issue bonds, for sale to the general public. The bond transactions of a company are managed in a different manner, however. A bond transaction would be sold by the underwriter bank. The following are several ways that a share price value of a company's stock may be determined:

  • A stock share value, once it is presented to the public for sale, may be determined by a random walk technique. This type of technique says that the public buyers, who purchase these stocks, are aware of the potential value of the stocks that they purchase. In this fashion, the share value is affected by the public's view of the future share price value. 

  • All existing information, both private company information and public market information, will determine the share price value. Certain patterns around various industries often assist in determining prices of share value. Seasonal patterns, or fundamental factors of an industry, can affect a share price value. Certain historical anomalies, or technical factors, may assist in pricing a certain stock.

  • Prices often fluctuate. A fundamental factor says that share value is determined by the season of the year and how that season may affect a certain industry. Fundamental pricing, also, says that stock prices go down on Mondays. Current news, either industry-specific or global events, can significantly change a share price value. 

  • Certain actions, that the company itself may take, can change a value of the company's stock. For example, the company may decide to issue a stock split. This, usually, means that the price of each stock that a stockholder owns will divide in half. This, also, means that the number of shares of stock that a stockholder owns will double in quantity. 

  • Certain intrinsic factors may affect the share value, and this phenomenon may cause the price of a share of stock to valuate below one dollar. If this phenomenon occurs, then the stock itself will be delisted, for the period of time that the stock price is below one dollar. This value of the stock will, then, be eligible for listing on a stock exchange, that is called the OTC or over-the-counter stock market. The rules say, overall, that a stock must have a one dollar value for, at least, ten consecutive trading days, in order to remain listed, on a major stock exchange.

A stock value is determined in several ways. There may be a general public pricing behavior, that assists in pricing a company's stock. There can be certain global events, or even weather events, that assist in determining how the price of a stock will present to the public. Certain industries have significant seasonal pricing factors. For example, the real estate and construction industries have seasonal changes, especially during the winter months of the year. Newer companies and smaller companies tend to be affected to a greater degree by seasonal changes, for example. One other significant phenomenon, that may affect stock pricing, is the stock trader's general behavior of buying round lots of one-hundred shares, for a basic investment trade.