Experts can u give reasons for that
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Please read below, which I read some times back in an article.Nishan123 wrote:I know how to calculate NAVPS but i want to know why NAV should lower than share price. Please can anybody tell me please
How book value of a share is related to its market value?
If all investors become financially intelligent, no one will buy a share at a price more than its book value. Means is book value will show that the share of a company is worth Rs100, no body will buy it at Rs.150. In other words the market value of share will be equal to the book value. But, if a company is doing hard for modernization and expansion of its business, it indicates that the turnover and profit of this company is going to improve in future. Then the investors gambles with an expectation of future benefits. In this case investors may agree to buy shares by paying more than its book value. Therefore, it is possible for the market price to be more than the book value if investors think that the company has growth potential and they have confidence that the company is likely to perform better than it is doing at present.
How can the Book Value of company guide us in buying a share?
Some times the book value of a company exceeds its market value. A company which is performing reasonably it will have a good book value. It may be because of the global meltdown, lower market demands, low market capitalization and reach, or fierce competition, the investors may have ignored this share. This will lead to a lower market value than its book value. Such shares will be a very good buy for future gains
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