Nominal Price vs Book Value vs Quotation: Which to Choose When Investing in Stocks

When you look to invest in stocks, you face three valuation metrics that seem to say the same thing but actually serve completely different functions: the nominal price, the book value, and the market value. In this guide, we break down each one, show you when to use each metric, and explain why many investors make the mistake of confusing them.

How Each Valuation Metric Is Calculated

The fundamental difference among these three lies in the data you use and what you end up obtaining. Understanding this is critical before making investment decisions.

The nominal price is the simplest: it simply divides the company’s share capital by the total number of shares issued. For example, if a company has a capital of €6,500,000 and issues 500,000 shares, each share has a nominal price of €13. It is a fixed number that rarely changes unless the company performs a capital increase or reduction.

The book value requires an additional step. You take the company’s total assets, subtract liabilities, and divide the result by the shares issued. Imagine a company with assets of €7,500,000, liabilities of €2,410,000, and 580,000 shares issued. The book value would be (7,500,000 - 2,410,000) / 580,000 = €8.78 per share. This number tells you the actual book value of the company.

Market quotation is different: it divides the market capitalization (número total de acciones × precio actual) by the shares issued. If a company is trading at €2,298 and has issued 3,020,000 shares, that is its current market price, determined by what buyers and sellers are willing to pay in real time.

What Each Metric Reveals About a Stock

The nominal price is fundamentally historical. It shows the starting point when the stock was first issued, but little more. It is useful in fixed income (bonds, obligations) because they have a defined maturity, but in stocks, its application is limited. It only becomes relevant when there are convertible bonds, where the nominal price serves as a reference for future debt-to-equity exchanges.

The book value is the favorite metric of value investing, the style of investing Warren Buffett popularized under the maxim “buy good companies at a good price.” This value tells you whether a company is undervalued or overvalued relative to what its accounting books reflect. By comparing the Price/Book ratio (P/VC) among companies in the same sector, you can identify which are cheaper relative to their net worth. However, this metric has a major problem with tech companies and small caps: their intangible assets (brand, software, patents) are not properly reflected in the accounting books.

Market value is what really matters when you operate. It is the price you see on your screen, generated by millions of buy and sell orders. Here you will discover whether a stock rises or falls, where your stop loss or take profit enters. The market discounts not only the current reality of the company but also future expectations, news, economic cycles, and even speculative euphoria.

When to Use Each Metric in Your Strategy

If you apply value investing, the nominal price is practically irrelevant. What you need is to compare the book value with the market price. If you find a company with a solid balance sheet, a good business model, but whose P/VC is below similar competitors, it could be an opportunity. But here’s the important part: do not invest just because the ratio is low. Verify that the balance sheet is truly solid and that the company has growth prospects.

If you do short-term trading, market value is your only tool. Set limit buy orders if you believe the price will fall further, or sell orders if you want to secure profits at a specific level. Remember that markets have hours: Europe operates from 9:00 to 17:30, the US from 15:30 to 22:00, Japan from 02:00 to 08:00, and China from 03:30 to 09:30 (Spanish time). Outside these hours, you can only leave pre-set orders.

The nominal price will rarely serve you directly, except when evaluating convertible bonds where the conversion price is referenced to an initial nominal value.

The Real Limitations of Each Method

The nominal price is practically obsolete for equity investment decisions. Its application is so limited that it adds no strategic value to your operations.

The book value fails miserably with companies whose value resides in intangible assets. A software startup may have a low book equity but be extremely valuable. Additionally, “accounting tricks” or creative accounting can distort this value, showing results that do not reflect operational reality.

Market value is volatile and reactive. It rises on irrational optimism, falls on panic, moves due to monetary policy decisions that have nothing to do with the company, responds to relevant sector news, macroeconomic expectation changes, and even speculative euphoria.

The market price can be completely disconnected from intrinsic value for prolonged periods.

Comparative Table of the Three Methods

Final Reflection: Integrate the Three Perspectives

There is no perfect metric. The most common mistake is obsessing over just one. Market value tells you “at what price you can buy or sell today,” the book value helps you determine if that price makes sense relative to net worth, and the nominal price is mainly a historical data point with specific utility.

True mastery lies in using all three together: first filter with P/VC to find cheap candidates, then analyze the market price for timing of entry, and keep the nominal price in mind if there are convertible bonds. Trading and investing require multiple perspectives, not just numbers.