Book Value VS Market Value?

Book Value and Market Value

Today we are going to understand the difference in Book value and Market value. They are also referred as Book Values and Market Values. So let’s begin..

What is Book value and Market Value ?

Book value is the net value of a firm’s assets found on its balance sheet, and that is the amount which all shareholders of the company would get if the company is liquidated(to liquidate means to close the company). It is what investors would get if they sold all the company’s assets and paid all its debts and obligations.

Book value of a company = Total assets − Total liabilities

When we divide book value by the number of outstanding shares, we get the book value per share (BVPS). It allows us to make per-share comparisons. Outstanding shares consist of all the company’s stock currently held by all its shareholders.

On the other hand, Market value is also known as market cap and is calculated by multiplying a company’s outstanding shares by its current market price.

Market cap of a company = Current market price per share X Total number of outstanding shares

Market Value Per share, it is simply the current market price of the share of the company.

Key Differences Between Book Values and Market Values –

Many investors and traders use both book and market values to make decisions. There are three different scenarios possible when comparing the books valuation to the market value of a company.

When market value of the company is greater than the book value of the company, it indicates that investors believe the company has excellent future prospects for growth, expansion, and increased profits. They may also think the company’s value is higher than what the current book valuation calculation shows. Usually you will find that most of the companies have market value higher than its book value because it market value realizes the potential future growth which its assets can bring.
When Book value of the company is more than its market value, it indicates 2 things mainly – i) Stock is not discovered by the market yet and has been undervalued and its potential is yet to be discovered or ii) Market has lost confidence in the stock as it has not performed well and market does not believe stock is worth trading at its Book Value.

Key metric to compare Market value and Book Value –

The Price to Book Ratio (P/B Ratio) – This ratio is a good way to compare the Market Valuation of a company to its Book Values. Formula for calculating PB ratio is – Market Price per Share / Book Value Per Share

To know that if the stock’s PB ratio is high or low, it is good to compare it with the industry peers. If the stocks PB is higher than the industry average, it means that the price of the stock is over valued, and if it is lower than the industry average, it might be undervalued.

Remember, if the stock is overvalued, it doesn’t mean you shouldn’t buy it, it may also mean the company is performing well and the investors are ready to pay the price. Similarly, if the stock is undervalued, it doesn’t mean it is cheap, it may also mean that the company may not be performing well enough and investors don’t see value in it.

Here we come to the end of this learning, hope you found good, check out our other articles as well and expand your knowledge!

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9th Sep 202120th Jan 2022 Subham Modi

Share Market for Beginners- Don’t be late, investing is great!

Warren Buffett, a very high profile American Investor said- ” I started investing at the age of 11 years old and think that I started it late”.

There is no perfect timing to start investing. Every moment or every time is the perfect time to start trading in share market.

Just like every business, the world of stock market also runs on some facts:-

* It too involves risks and uncertainities due to dynamic and volatile market.

Let me ask you a simple question- Before learning to swim, do we just dive into the ocean instantly?

Before learning to drive, do we just pick up our cars to drive on road and expect no accidents?

No! Not at all.

Stock market ,too, like every business requires learning of proper skills to pick correct stocks as per our investing portfolios. It is just like that ocean or busy road loaded with vehicles which runs on strategies,updated knowledge of market, tools to analyse different companies shares and stocks and an ample amount of stable mind set and patience about when to buy, sell or hold the stocks in order to earn maximum returns.

There are lakhs of people all over the world who thinks to become rich overnight through stock market or stock market is dangerous or it is unworthy to invest in it.

Clearing all those facts, stock market is not a gambling platform that one can invest and become rich overnight.

It’s requires patience with knowledge just like every business.

The fact that it’s dangerous. Every business is risky or dangerous if we think in that way. From that point of view, even after learning to drive a car, a person shouldn’t drive it because the road is still prone to accidents and mishaps.

Every event or business involves the possibilities of mishaps.

People invest in FD to earn a fixed rate of 7-8% p.a.

Stock market is dynamic. It could make you earn 15-20% or even loose 15-20%.

Beginners investing in stock market or are willing to invest in stock market should have some basic facts cleared or should have a required knowledge before investing in any company’s stocks and shares.

Last but the most important fact it is not compulsory that one needs to invest high amounts of money in order to enter stock market. One could even start with smaller denominations.

Happy learning, Happy investing!

Thank you!

29th Apr 202020th Jan 2022 Subham Modi

Five Things To Do Invest

Five Things That a Experienced Trader Does and You Don’t :

Long Term is The Name of The Game
Business Make Profit Not Stocks
Quality Et Quantity
Prepare Yourself For a Long Wait
Look For Multibagger Potential

1. Long Term is The Name of The Game

For long term investment, there can’t be a better medium of investment than the
stock market. Everybody says it, but Rakesh Jhunjhunwala truly believes and
practices it. He says, think and buy not buy and think. In this simple sentence, there is wisdom which people often miss. They invest without thinking, then if the stock starts earning profit they immediately sell it to book some petty profit. Every stock, in its life cycle, goes through various ups and downs. But only experts like Rakesh Jhunjhunwala understand that good stock if held for a long period of time, will always make you loads of money.

2. Business Make Profit Not Stocks

Ever wonder what induced Jhunjhunwala to invest in companies like Titan, Lupin and Sesa Goa? He invested in these companies when nobody was giving them a second glance. He bought a huge chunk of shares in these companies at very low price. Titan at 65, Lupin at 60 and Sesa Goa at 23 to be precise. In a due course of time Titan reached 2275, Lupin reached 2000 and Sesa Goa touched whopping 4200. It’s not that RJ has some crystal ball through which he saw this coming, he simply evaluated the businesses on the counts like sustainability, performance and demand. That’s why they say invest in business not just in its stock.

3. Quality Et Quantity

One of the highlights of Jhunjhunwala’s portfolio is that he buys shares in huge quantities. Sometimes the quantity is as big as few percent of the company’s share. When the company is in profit, more shares you have more profit you will fetch. As the individual investors can’t buy as big a quantity as Jhunjhunwala, they should try to buy the maximum quantity nonetheless. The per share profit can only be
maximised if you have a handsome quantity of shares. Always remember: quantity is as important as quality.

4. Prepare Yourself For a Long Wait

Good things come to those who wait. This sentence was perhaps written for the stock investment as this is exactly what investors have to do to get the optimum
value out of their capital. Rakesh Jhunjhunwala’s portfolio stands as a shining example of this theory. He holds major stakes in three:.companies – Titan, Crisil and Lupin. He bought these shares over a decade ago and he holds these
shares even today. The point is, these companies have given him 8000%, 5000%
and 130000% profit respectively. So, isn’t it worth holding some shares for a long
period of time? You bet!

5. Look For Multibagger Potential

Rakesh Jhunjhunwala has made a career out of identifying multibagger
stocks. Stocks in his portfolio like Titan, Lupin have multiplied their value I
more than 10000/o since he bought them. He has an eye for undervalued
stocks. He assesses the stocks he is going to buy on the ‘value investment ‘
parameters. Once convinced of their potential he goes for a long haul.
Spotting multibagger stock is the biggest secret of Rakesh Jhunjhunwala’s mammoth wealth.

For any query regarding Investment

Contact : 9933069117

Thanking You
Subham Modi

27th Apr 202020th Jan 2022 Subham Modi

Investing During The Covid-19

It is always a smart idea to invest any spare money, and with the coronavirus going around it might be the last thing on your mind. However, probably the only positive thing that has come out of the virus are the benefits for people getting into investing and in return it also helps the economy by putting more money into the stock market. This page will be going over multiple topics: the purpose of the stimulus bill because the first wave of checks just recently happened, the importance of investing because that is one of the best ways to grow your wealth, stocks and index funds that would be a safe investment to give you residual income over time, and last will be the potential people have if they keep investing and how it can lead to a big increase in their income.

What is the point of the Stimulus Bill?

We have all been hearing about and reading about the stimulus bill,either from another website, from the news, etc. you have been reading about it. I am here to talk about what the point of it is so lets get into it. With the virus going full on at the moment and everyone still being on a stay at home order, businesses haven’t been able to make the sales that they need to make in order to stay open and that’s a big deal because 2/3 of the United States economic transactions are consumer spending, so they added the stimulus bill so that people can get money and spend it so why not spend it on the stock market.

Importance Of Investing

Investing is the way a lot of people find financial freedom and are able to increase how much they make a year, heck some people even live off of making investments such as Rakesh Jhunjunwala , a man whose net worth is 190 Crore USD, now i’m not saying that everyone should invest for a living but I am saying that everyone should invest on the side at least, I can guarantee you that if you keep investing over the course of your life that you will be able to at lest increase your income by $ 10k a year.

Potential If you Keep Investing

Now you probably wont be making no more than $100 a year but if you just invest $400 a month then you will be able to increase your income a year by $50 and you don’t lose the money you put in and even if the value of the stock goes down then it isn’t a big deal due to the dividend income and if you keep investing more and more as you grow in your career and over many years you could be potentially making $48,000 a year while you sleep and that would be on top of your income from your daily job.

For any query regarding Investment

Contact : 9933069117

Thanking You
Subham Modi

24th Apr 202020th Jan 2022 Subham Modi

Blue Chip Stocks

Hey Investor, Interested in learning something new today? Let’s Go with our new topic Blue Chip Stocks. So, What are Blue Chip Stocks???

Large companies that are well established and consistent performers are blue-chip companies/stocks. Basically these companies mostly don’t have debts or very low debts and you will see reputed names in this list.

Here’s a list of Blue Chip companies in India

TCS

TATA Consultancy Services Limited is the biggest Indian multinational information technology service and consulting company, and is headquartered in Mumbai, Maharashtra, India

HDFC

HDFC Bank Ltd. is an Indian banking and financial services company headquartered in Mumbai, Maharashtra. HDFC Bank is India’s largest private sector lender by assets. It is the largest bank in India by market capitalisation as of March 2020

ASIAN PAINTS

Asian Paints Limited is an Indian multinational paint company headquartered in Mumbai, Maharashtra. The company is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings and providing of related services.

ITC

ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. Established in 1910 as the ‘Imperial Tobacco Company of India Limited’, the company was renamed as the ‘India Tobacco Company Limited’ in 1970 and later to ‘I.T.C. Limited’ in 1974.

NESTLE INDIA

Nestlé S.A. is a Swiss multinational food and drink processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the world, measured by revenues and other metrics, since 2014.

RELIANCE INDUSTRIES

Reliance Industries Limited is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra. Reliance owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications.

INFOSYS

Infosys Limited is an Indian multinational corporation that provides business consulting, information technology and outsourcing services. It has its headquarters in Bangalore, Karnataka, India.

EICHER MOTORS

Eicher Motors Limited is an Indian manufacturer of motorcycles and commercial vehicles. Eicher is the parent company of Royal Enfield, a manufacturer of middleweight motorcycles. In addition to motorcycles, Eicher has a joint venture with Sweden’s AB Volvo – Volvo Eicher Commercial Vehicles Limited.

Subham Modi
Contact : 9933069117