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What is the Market Price Per Share and How do you Calculate it?

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Question: What is the Market Price Per Share and How do you Calculate it?
Answer:

The market price per share of stock or the price per share of stock is a current measure of price not an accounting, or historical, measure of the value of stock like the book value per share, which is based on the information from a company's balance sheet. The market price per share is a financial metric that investors use to determine whether or not to purchase a stock.

Calculation of Market Price Per Share

There are several steps you must take in order to calculate the market price per share. The first step is to determine the date on which you want to calculate the market price per share. The second step is to find the price on that particular date. You can look at the company's monthly, quarterly, or annual report to get the stock price on that particular date.

Third, you must consider the preferred stock, if any, that this company owns. If the company owns and has paid dividends on its preferred stock, subtract those dividends from the stock price you have found from the financial report. Fourth, determine the number of shares of stock outstanding by looking at the company's quarterly or annual report.

After you have gone through these four steps, you have the information you need to calculate the market price per share. Step 3 gives you the numerator of the equation and Step 4 gives you the denominator of the equation:

Market Price Per Share = Net Income - Preferred Dividends/Number of Shares of Common Shares Outstanding = $________

Interpretation of Market Price Per Share vs Current Trading Price

The market price per share and the current price at which the stock is being traded are not necessarily the same. The market price per share is also called the intrinsic value of a share of stock or the actual value based on the actual variables taken from the company's financial statements. The current trading price is based on investor buying and selling behavior. If investors are paying more than the intrinsic value, then the stock is overvalued. If investors are paying less than the intrinsic, then the stock is undervalued and is a good buy.

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