Master the 3 valuation metrics: Where the net book value comes from and when to trust them

If you are an operator or investor, you have probably heard of the nominal value, the net book value, and the market price. But here comes the important part: each one tells you something completely different about a stock, and confusing them is the most costly mistake you can make.

In this guide, we will unravel exactly what data each metric feeds, what each number really means, and—most practically—when to use it in your daily operations.

The three pillars of valuation: Where the numbers come from

It all starts with a simple question: what information is used to calculate each value?

The nominal value: The starting point that almost no one uses

The nominal value is the most basic of all. It is calculated by taking the company’s share capital and dividing it by the total number of shares issued.

Formula: Share Capital ÷ Number of Shares = Nominal Value

Let’s look at a real case: A company called BUBETA S.A. has a share capital of €6,500,000 and issued 500,000 shares at its IPO.

Nominal Value = €6,500,000 ÷ 500,000 = €13 per share

That’s all. It’s the price at which the shares were originally launched to the market. But here’s the tricky part: once the stock starts trading, the nominal value loses almost all its usefulness in equity trading.

The net book value: What the balance sheet really says

The net book value is completely different. Here, we are not looking at the issuance moment but the current state of the company. It is calculated by subtracting liabilities from assets and dividing the result by the number of shares.

Formula: (Assets - Liabilities) ÷ Number of Shares = Net Book Value

Example: MOYOTO S.A. has assets of €7,500,000, liabilities of €2,410,000, and 580,000 shares outstanding.

(€7,500,000 - €2,410,000) ÷ 580,000 = €8.775 per share

This number is powerful because it tells you exactly what the “real” value of the company is according to its accounting. If the market price is below this number, technically the stock is cheap. If it’s above, it’s expensive (or the market sees something the balance sheet doesn’t reflect).

The market value: What you actually pay

Market value is simply the price. It is calculated by dividing the company’s market capitalization by its issued shares.

Formula: Market Capitalization ÷ Number of Shares = Market Value

Example: OCSOB S.A. has a market capitalization of €6.94 billion and 3,020,000 shares issued.

€6,940,000,000 ÷ 3,020,000 = €2.298 per share

This is the price you see on your quotation screen. It’s what you pay when you buy and what you receive when you sell.

What each metric truly reveals

Here’s the real secret. Numbers are nice, but what do they mean?

The nominal value is pure history. It has little relevance after the first day of trading. Its only utility appears in specific instruments like convertible bonds, where it acts as a predetermined conversion price. Outside of that, it’s an archaeological data point.

The net book value is your accounting compass. It shows you whether a company is “expensive” or “cheap” by comparing the market price with what the balance sheet states. Investors practicing value investing—the style made famous by Warren Buffett—are obsessed with this metric. Its logic is simple: “Buy good companies at a good price.”

But here’s a trap: the net book value fails dramatically with tech companies and small caps. Why? Because their most valuable assets are intangible (patents, talent, data) and do not appear fully on the balance sheet. Additionally, there are “creative accounting” tricks that can artificially inflate these numbers.

The market value is pure reality. It’s what the market has decided the company is worth at this exact moment, based on thousands of factors: growth expectations, macroeconomic news, sector sentiment, rumors, everything. That’s why it’s so volatile.

When to use each: The operational guide

The net book value in action

Let’s say you want to invest in a listed gas company in the IBEX 35 but don’t know which of the two main ones to choose. You compare the P/B ratio (Price/Book Value):

ENAGAS: P/B = 0.95 (cheaper in terms of book value) NATURGY: P/B = 1.15 (more expensive)

If you only looked at this ratio, ENAGAS seems more attractive because its price is closer to—or even below—its book value. NATURGY is trading above what its balance sheet suggests.

But beware: A single ratio never defines an investment decision. You need to look at profitability, debt levels, sector prospects, all together. The net book value is a tool, not a dictator.

The market value in daily operations

When you open your trading platform in the morning, the market value is all that matters. It’s what you see in green or red, what determines whether you make or lose money.

If you buy a META PLATFORMS stock at $113.02 (yesterday’s close) believing it will fall further tomorrow, you can set a limit buy order at $109.00. The order will only execute if the price drops to that level during the next session.

If the market bounces and rises instead of falling? Your order never executes. It’s that simple. The market value rules trading.

Also remember that trading hours vary by region. In Spain and Europe: 09:00-17:30. In the US: 15:30-22:00. In Japan: 02:00-08:00. Outside these hours, you can only leave pre-set orders that will execute if conditions are met.

The pitfalls of each metric

The nominal value is practically useless after the IPO. Its journey is very short and it offers almost nothing for trading decisions.

The net book value suffers from two major problems:

1. Fails with tech and small companies because their intangible assets are not accurately reflected on the balance sheet
2. Can be manipulated through creative accounting, so a high number does not guarantee the company is truly “healthy”

The market value is the most volatile metric because it responds to factors that often have little to do with the actual company:

• An interest rate hike announcement can crush any stock, even if the company is perfectly fine
• News about regulation in the sector can spike it without fundamental reason
• Rumors of mergers, relevant events in competitors, changes in economic expectations… all move the price

The result: the market constantly overvalues or undervalues, disconnecting from the company’s financial reality.

The quick reference

The conclusion you need

There is no “winning metric.” Each answers a different question:

• The nominal value asks: “When was it born?”
• The net book value asks: “What does the balance sheet say?”
• The market value asks: “How much is it worth right now?”

What sets successful operators apart is knowing when to ask each question. A value investor will obsess over the net book value to find cheap gems. A trader will only look at the market value and charts. A fundamental analyst will use all tools together.

Investing is not mastered by reading a couple of articles. But if you understand these three pillars and when to apply each, you already have a clear advantage over most operators.