Considerations in the valuation of shares and businesses 3 / 4

Considerations in the valuation of shares and businesses

Marketability and liquidity of shares

For shares without a stock exchange quoting - this means it’s difficult for an investor to sell their shares. 

This means that these shares aren’t as valuable as quoted ones

Availability and sources of information

Some information will be verified by 3rd parties such as audited accounts, however budgets and projections will necessarily be subjective

Also not all plans can be made publicly available due to competition being able to see them

Market imperfections and pricing anomalies

When using PE to value a share it can be difficult to find a similar company, because quoted companies often have a far higher range of diversification

Market capitalisation

This is the market value of a share x number of shares

The market price though is subject to outside economic conditions and also to potential takeover bids etc so it may not represent the true fair value of a share