Price vs value
A share's price is the last number a buyer and a seller agreed on. Value is what the business is actually worth: what it earns, what it owns and what it is likely to produce for its owners over time. Price and value usually sit close together, but they do not have to, and the gap between them is where people overpay in excitement or sell in panic.
Price and Value side by side
| Price | Value | |
|---|---|---|
| What it is | The last number a buyer and a seller agreed on | What the business is actually worth, based on what it does and earns |
| Where you see it | On the screen, every second | Nowhere printed; it is an estimate you reason towards |
| What moves it | News, rumours, and the shared mood of buyers and sellers | What the business actually earns, owns and is likely to produce |
| Can two people differ | No; there is one last price | Yes; two careful people can reach slightly different estimates |
| Does the company change when it moves | Not necessarily; the price can move with no change in the company | Only when the business itself changes |
Price is an opinion at a moment
A price can move the moment news breaks, a rumour spreads, or a large group of traders gets excited or scared together. None of that requires the company to have changed at all. It is better treated as an opinion worth questioning than as an order you must obey.
Value is an estimate
Value is not a fact printed anywhere. It is an estimate you or any investor reasons towards, using what the business actually does and earns. What matters is that it is built on the business, not on the day's mood.
Why they drift apart
When market sentiment turns excited, buying pushes the price above what the business is worth. When sentiment turns fearful, selling pushes it below. The company has not become better or worse in either case. The Valuation Lab lets you try the idea with your own numbers.
A habit, not a formula
You do not need a formula to start noticing the gap. When a price jumps or falls sharply, ask what actually changed about the business, not just about the price. If nothing real changed, the price moved on sentiment alone. Maetis does not give investment advice.
A jump with no news (hypothetical numbers)
You reckon a company is worth about ₹350 a share, based on what it earns. After an excited news report, the market price jumps to ₹420 in two days. The company reports nothing new, so the ₹420 reflects mood, not a higher value. Your estimate of value is still about ₹350, and the price is now about 20 percent above it.
Common questions
- What is the difference between price and value?
- Price is what the market is asking right now. Value is what the business is actually worth, an estimate based on what it earns.
- Can price be higher than value?
- Yes. When sentiment turns excited, buying can push the price above what the business is worth.
- How do I know a company's value?
- You cannot know it exactly. It is an estimate, and careful people can reach slightly different ones.
- If the price falls, has the value fallen?
- Not necessarily. Ask what actually changed about the business. If nothing real did, the price moved on sentiment.
Related terms
This page compares ideas and does not recommend either one. Maetis does not give investment, tax or legal advice.