What is the intrinsic value of a stock? ,what is the difference between Intrinsic value, Face value and Market value of a stock ? Explain in layman’s language
Intrinsic Value is what a stock is really worth — not based on its price today, but based on the actual financial health of the company. Think of it like the true value of a business based on:
- How much money the company makes (profits)
- Its future growth potential
- How much debt it has
- Its assets, etc.
It’s what an investor believes the company is actually worth, even if the current market price says something different.
✅ Example:
If a stock is trading at ₹100 but, based on the company’s future earning potential, it’s actually worth ₹120, then ₹120 is its intrinsic value.
🔹 What is the Face Value of a Stock?
Face Value is just a fixed value assigned by the company when it first issues the stock. It’s usually a small amount like ₹1, ₹2, ₹10, etc. It’s mostly used for accounting purposes.
It has nothing to do with the stock’s market price or what it’s really worth.
✅ Example:
A company issues shares with a face value of ₹10, but in the stock market, it might be trading at ₹200.
🔹 What is the Market Value of a Stock?
Market Value (or market price) is the price at which the stock is currently being bought and sold in the stock market. It keeps changing every second based on demand and supply, news, investor sentiment, etc.
✅ Example:
If a stock’s current price on the stock exchange is ₹150, that’s its market value.
🟨 Summary Table:
| Term | What It Means | Example |
|---|---|---|
| Intrinsic Value | What the stock is truly worth based on fundamentals | ₹120 (real worth) |
| Face Value | Original value set by the company, for accounting | ₹10 (bookkeeping number) |
| Market Value | The price it’s currently trading at in the market | ₹150 (current trading price) |
If you’re an investor, you want to buy a stock when its market value is lower than its intrinsic value — that means you’re getting a good deal!
