## Investors Must Know Market Value: Key Term in Investment Analysis

In the investment world, making investment decisions is not an easy task. Investors need to study various information, from fundamental data (Fundamental Analysis) to technical data. In fundamental analysis, metrics such as **Market Value (Market Capitalization)** are indispensable tools for assessing the worthiness of an investment. By understanding Market Value deeply, investors can more accurately measure risks and opportunities in their investments.

## What is Market Value? The Meaning You Need to Know

**Market Value (Market Capitalization)** refers to the total value of a company or asset as evaluated by the market at the current moment. Calculating Market Value is very straightforward:

**Market Value = Current Stock Price × Total Outstanding Shares**

For example, if Company AAA has 300 million common shares outstanding and the current stock price is 1.50 THB per share, then the Market Value of Company AAA is 450 million THB.

Market Value is not limited to stocks traded on the stock exchange; it also applies to other assets such as real estate or business assets. In these cases, appropriate valuation methods from valuation experts are used.

## What Factors Drive a Company's Market Value?

A company's Market Value is not static; many factors influence its changes:

**1. Financial and Operational Performance** - Companies with high profits, continuous sales growth, and efficient resource management tend to have higher Market Values.

**2. Overall Economic Conditions** - A thriving economy increases Market Value, while a recession tends to decrease it.

**3. Quality of Management** - Clear vision and effective leadership increase investor confidence, leading to higher Market Value.

**4. Credibility of Products and Services** - High-quality products and satisfied customers help build a good reputation for the company.

**5. Financial Status** - Liquidity, debt-paying ability, and good financial structure all impact Market Value.

## How to Represent Market Value: Formats and Methods

Market Value is mainly expressed in two formats:

**Format 1: Market Value of the Company (Market Value - Stock Market)**

Used for companies with publicly traded shares, calculated by multiplying the number of outstanding shares (Outstanding Shares) by the closing price of the stock (Closing Price). This figure fluctuates daily with market volatility.

**Format 2: Asset Market Value (Market Value - Asset Market)**

Used for assets not traded on the stock exchange, such as real estate or specific businesses. Valuation methods follow standard procedures, considering factors like asset condition, location, and other relevant aspects.

## Market Value vs. Market Price: What's the Difference?

New investors often confuse Market Value with Market Price, although both relate to price, they are fundamentally different:

**Market Price** is the price level determined by supply and demand in the market. When buyers outnumber sellers, the price rises; conversely, it falls. These prices change every minute based on market sentiment.

**Main Differences:**

1. **Time Frame** - Market Value considers the long-term perspective, while Market Price changes daily or even every minute.

2. **Calculation Method** - Market Value is derived from financial analysis, whereas Market Price results from negotiations between buyers and sellers.

3. **Reliability** - Market Value provides more stable information, while Market Price can be influenced by temporary external factors.

## Market Value vs. Book Value: Meaning and Differences

**Book Value (Book Value)** or Net Asset Value is the net worth of a company’s assets, calculated as:

**Book Value = Total Assets - Total Liabilities**

For example, if Company BBB has total assets of 500 million THB and total liabilities of 250 million THB, its Book Value is 250 million THB. This figure indicates that if the company liquidates and sells assets to pay off debts, shareholders would receive 250 million THB.

**Differences between Market Value and Book Value:**

- **Calculation Method** - Market Value uses current market prices; Book Value uses balance sheet data.
- **Volatility** - Market Value fluctuates with market conditions; Book Value is more stable.
- **Usage** - Market Value aids in long-term investment decisions; Book Value helps assess risk.

## Market Value vs. Market Capitalization: Differences in Various Aspects

**Market Capitalization** (Sometimes called Market Cap) is the total market value of all outstanding shares of a company. Although it appears similar to Market Value, there are differences:

**Main Differences:**

1. **Scope** - Market Value is a broader term covering all assets; Market Capitalization specifically refers to the value of traded shares.

2. **Application** - Market Capitalization is widely used to categorize company size (e.g., Large-cap, Mid-cap, Small-cap), while Market Value is used for general analysis.

For example, Apple Inc. had a Market Capitalization of approximately 3 trillion USD at the end of 2023.

## Limitations Investors Should Know About Market Value

Although Market Value is a useful tool, it has limitations:

**1. Market Volatility** - Market Value changes with trading activity; stock prices can rise or fall rapidly due to investor actions or news.

**2. Incomplete Information** - Market Value does not tell the full story about a company; it cannot reveal internal structure, management quality, or future growth potential.

**3. Non-Traded Companies** - Many companies, especially startups or private businesses, lack a clear Market Value figure.

**4. Market Influences** - External factors like macroeconomic conditions or major events can affect Market Value regardless of company performance.

## What You Must Remember About Market Value

Market Value is a fundamental indicator that investors need to understand. It helps you gauge company size, assess investment worthiness, and compare with other companies.

Beyond just analyzing stock charts (Technical Analysis), you should also delve into the company's structure and intrinsic value (Fundamental Analysis). By deeply understanding Market Value, you can make smarter investment decisions and reduce the risk of losing money in the long run.