Market value per share is the price at which a share of company stock can be acquired in the marketplace, such as on a stock exchange. Value investors closely follow this figure to determine when it makes sense to acquire shares at a sufficiently low price.
An issuing company’s treasurer also tracks the market price to determine when the price is high enough to justify a new stock issuance that maximizes the amount of cash raised by the entity in proportion to the number of shares sold. A business can establish a floor for its stock price by creating a stock buyback program that acquires shares on the open market whenever the market price drops below a certain threshold level.
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.
The market value per share is influenced by a number of factors, including the following:
- Reported income of the issuing entity
- Reported cash flows of the issuing entity
- Existence of a stock buyback program
- Investor perceptions of the future prospects of an issuing entity
- Investor perceptions of the future prospects of the issuing entity’s industry, and of the economy as a whole
The market value of a share can be suspect when few shares are available for sale and/or a company does not list its shares on a stock exchange. In this case, share prices can vary wildly on just a few small trades. This situation makes it easier for individuals to engage in fraud by making a few small trades to ramp up the market value per share, which they then use to sell larger blocks of shares to unsuspecting investors at the inflated prices.