how do you calculate the market price of a share using the balance sheetvaluation,net realisation value,earnin

Question

show calculations for market price of a share using the balance sheet valuation,net realisation value,earnings basis,dividend valuaton methods.

Answer 1

By definition the 'Market Price' of a Share is the PRICE you will get in the MARKET for that Share (i.e. as quoted on the stock exchange)

What you mean here is Share VALUATION (aka 'Fair Market Value')

One way to estimate the 'fair value' of a share you calculate the 'net present value' of the future Dividend stream (making the assumption that 'eventually' the Company is voluntarily wound up & the assets are sold off and the nett is returned to shareholders as a final dividend).

Other ways exist (you have mentioned 4 methods) but all are essentially just a 'guess' .. even estimating Dividends for next year is almost impossible, let alone estimating until the 'end of life' ... and calculating balance sheet variation typically means making assumptions about never-ending annual percentage increase in turn-over etc).. and as we all know, no company is ever 'wound up' except by going bust, at which point typically the nett worth of the asssets (net realisation value) to shareholders is zero no matter what the books say ...

Finally, to calculate NPR you have to estimate the risk capital interest rate for the remaining life of the company ... and no-one knows what next years rates will be never mind what they will be in 25 years time ..

However, if you have nothing else to do read on below ...

NB> All these 'valuations' have nothing to do with the ACTUAL market price of the shares .. market price is 50% 'fear' and 50% 'greed' ..

The price of a share goes down untill 'fear' (people selling) is balanced by 'greed' (peole buying) .. and the price goes up untill 'greed' (people buying) is balanced' by 'fear' (people selling) ...
... go look at Northern Rock share price to get some idea of the 'fear' V 'greed' process .. or study the dot.com boom to see what happens when there is more greed in the market than fear (and dot.com bust to see what happens when fear overrides greed)