Three valuation methods in the stock market: nominal, accounting, and market

When analyzing a stock to decide whether to invest, we encounter multiple ways to evaluate it. This article will show you how nominal value, book value, and market price offer different perspectives on the same investment. You will understand why value investing depends on book value, when to trust the quote price, and what the real risks of each approach are.

Practical applications: how to use them in your daily trading

Before diving into formulas, it’s helpful to know what each method is used for in real market situations.

Nominal value in convertible instruments

Nominal value especially appears in products like convertible bonds. In these securities, you invest an initial capital, receive periodic interest, and at maturity, you get shares at a predetermined price. Although technically not a pure nominal value, it functions as a known reference in advance for future exchanges. This method has very limited interpretive scope in conventional stocks, as its usefulness is almost exclusively at the time of issuance.

Book value: the compass of value investing

The approach of buying “good companies at a good price” critically depends on book value. This method allows identifying companies with solid balance sheets that trade below their intrinsic book value. The logic is simple: compare the Price/Book Ratio (P/VC) among competitors.

For example, if you analyze two gas companies in the IBEX 35 and see that one has a lower P/VC, it means that for each euro of net assets, it trades cheaper than its competitor. This ratio helps you discriminate between options, as long as you consider other factors simultaneously.

Market value: your daily operational reference

The price you see on screen is the result of crossing buy orders with sell orders. This market value is what you actually pay or receive. With it, you set your profit targets (take-profit), define stop levels, and activate limit orders during corrections. It is your main execution tool.

Calculation and data sources

Sources will determine your result, and each method requires different information.

Nominal value: share capital divided by shares

The formula is straightforward: take the company’s share capital and divide it by the total number of issued shares.

Example: BUBETA S.A. has a share capital of €6,500,000 with 500,000 shares issued.
Nominal Value = €6,500,000 ÷ 500,000 = €13 per share

Book value: net equity divided by number of shares

Subtract liabilities from assets and divide the result by the number of shares outstanding.

Example: MOYOTO S.A. has assets of €7,500,000, liabilities of €2,410,000, and 580,000 shares.
Book Value = (€7,500,000 - €2,410,000) ÷ 580,000 = €8.78 per share

Market value: market capitalization divided by shares

Divide the company’s total market capitalization by its outstanding shares.

Example: OCSOB S.A. has a market cap of €6,940 million and 3,020,000 shares.
Market Value = €6,940,000,000 ÷ 3,020,000 = €2,298 per share

What they reveal: interpretation of each value

Nominal value as a historical reference point

Indicates the initial issuance price of the stock. In fixed income, it has constant relevance (you will recover that amount at maturity), but in stocks without a defined maturity, it quickly loses utility after going public. Its main function is to serve as a historical comparison point.

Book value: the company’s real health

Shows how much the company is worth according to its accounting books. It helps detect undervalued versus overvalued companies, especially in traditional sectors. However, this method generates significant inefficiencies when valuing tech and small caps, where intangible assets dominate. Additionally, creative accounting can distort this indicator.

Market value: the reality of now

While book value says “what it should be,” market price says “what it is.” It discounts all intrinsic and extrinsic variables of the moment. It won’t tell you if the price is expensive or cheap; for that, you need indicators like PER, P/VC, or complementary fundamental analysis.

Trading hours by zone

Market value varies depending on when you trade. Major markets have these hours (Spanish time):

• Spain and Europe: 09:00 to 17:30
• USA: 15:30 to 22:00
• Japan: 02:00 to 08:00
• China: 03:30 to 09:30

Outside these hours, you can only place pre-set orders that will execute if the market hits them.

Practical example: META PLATFORMS closes at $113.02, and you expect a bigger drop tomorrow. You place a limit buy order at $109. If in the next session the price bounces instead of falling, your order will never execute because the price never reached your limit.

Actual limitations of each method

Nominal value: obsolete in equities

Its interpretive horizon is extremely short. It offers little value for conventional trading operations. It remains relevant only in very specific contexts of complex instruments.

Book value: inefficient with intangible assets

Penalizes small and tech companies where the real value resides in patents, brand, or data (intangible assets not properly reflected in books). Moreover, creative accounting can generate distortions, though this is not common. The P/VC ratio alone should never be the sole decision metric.

Market value: prisoner of uncertainty

The market constantly discounts and overvalues external factors. Changes in monetary policy, sector-relevant news, national economic expectations, or irrational euphoria in certain segments can completely detach the price from the company’s operational reality. This causes volatility that often does not reflect changes in business health.

Quick comparative table

Conclusion: context is everything

All three methods are complementary tools, not mutually exclusive. A competent analyst does not rigidly stick to a single ratio. Nominal value serves as a historical reference. Book value identifies opportunities in value segments. Market value executes your operational decisions.

The key is to interpret each indicator according to the context: sector, company size, business maturity, and your investment horizon. Without this integrated understanding, no individual ratio will protect you from valuation errors. That’s why, before opening positions, spend time understanding not only the numbers but what they truly tell.