How to differentiate nominal value, book value, and real value in stocks: A practical guide for investors

When analyzing a stock in the market, you find multiple price references that can confuse you. Which one truly matters? In this comprehensive guide, you will discover the three fundamental ways to value a stock, when to apply each, and what data you need to avoid mistakes in your investment strategy.

The reality of price: three different perspectives

The price of a stock is not a single number. There are three different viewpoints investors use to understand whether it is expensive, cheap, or fairly valued. Each one is based on different information and reveals different things about the asset.

Market value is the first thing you see on your trading screen. It is the price at which the stock is actually bought and sold in the secondary market, resulting from the crossing of buy and sell orders. This price reflects the market’s opinion at this exact moment about the stock, incorporating fundamental analysis, speculation, news, and future expectations.

Book value, also called net asset value, comes from the numbers reported by the company in its balance sheet. It represents what each share would be worth if we liquidated the company today: we calculate total assets, subtract total liabilities, and divide by the number of shares issued.

Nominal value is the most forgotten by modern traders. It was the original issuance price of the stock when the company went public, calculated by dividing the share capital by the number of shares issued. Today, its usefulness is limited in equity investments, although it remains relevant in instruments like convertible bonds.

When you need to calculate each: the working formula

Working with each type of value requires different data. Knowing their sources is essential to apply them correctly in your analysis.

Nominal value: from share capital

The formula is straightforward: divide the company’s share capital by the total number of shares issued.

Let’s take BUBETA S.A. as an example. If it has a share capital of €6,500,000 and has issued 500,000 shares at its IPO, then:

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

This is the reference price from which everything started. It tells us little about future profitability.

Book value: from the company’s balance sheet

Here, you need access to the company’s accounting data. The formula: (Total Assets - Total Liabilities) ÷ Number of shares issued.

Observe the example of MOYOTO S.A.: with assets of €7,500,000, liabilities of €2,410,000, and 580,000 shares issued:

Book Net Value = (€7,500,000 - €2,410,000) ÷ 580,000 = €8.78 per share

This number tells you the actual equity backing each share according to the company’s accounting records.

Market value: from market capitalization

You need the market capitalization (closing price × total shares) and divide by the number of shares. In reality, the result is the price you already see on the screen.

With OCSOB S.A., which has a market cap of €6.94 billion and 3,020,000 shares:

Market Value = €6,940,000,000 ÷ 3,020,000 = €2.30 per share

This is the actual price at which you will operate daily.

What each value reveals about an investment

Beyond the figures, each perspective teaches you something different about the stock.

The nominal value is mainly useful as a historical reference point. It indicates where the company’s journey in the stock market began. In equity, it tells us little more, but in convertible bonds, it becomes relevant: it sets the fixed price at which the conversion into shares will occur. For example, in the issuance of IAG convertible bonds in May 2021, the conversion price was set as a percentage of the average stock price over a certain period.

The book value is the preferred tool of value investing practitioners. It shows whether the company is undervalued or overvalued according to its balance sheet. If the market price is below the book value, there may be an opportunity. If it’s above, it might be overvalued. However, this metric can create significant inefficiencies in tech companies and small caps, where intangible assets weigh more than traditional balance sheets.

Market value simply tells you “what it is”, not “what it should be”. It is the operational reference for entering and exiting positions. It does not judge whether the price is fair, only sets it. To determine if it’s expensive or cheap, you need to apply other indicators like PER, price/book ratio, or deep fundamental analysis.

Use cases in your daily trading

Applying book value: company comparison

Imagine you want to invest in gas companies in the IBEX 35. You compare the Price/Book ratio (P/VC) among the main options:

ENAGAS shows a P/VC lower than NATURGY according to Expansión data. This means Enagas trades cheaper relative to its book value. The provisional conclusion: higher potential for revaluation if the market recognizes its book value.

But beware: no single ratio should be your definitive criterion. They work better when used together. The P/VC is just one tool in your analysis, not the absolute truth.

Trading with real-time market value

Market value is your daily reference when opening positions. Imagine META PLATFORMS drops sharply during the session and closes at $113.02. You think it might go lower tomorrow.

You set a limit buy order at $109.00. If the price hits that level, you buy automatically. If it doesn’t, the order expires unfilled. This is the only way to operate: with real market prices and pre-set orders.

Remember that trading hours vary. Major European exchanges operate from 09:00 to 17:30 (Spanish time), while the US market runs from 15:30 to 22:00. Outside these hours, you can only leave pre-established orders.

Nominal value in complex instruments

Although the nominal value has little use in ordinary stocks, it appears again in products like convertible bonds. Here, it sets the conversion price, allowing you to plan at what stock price you will recover your fixed-income investment.

Limitations you should know

No method is perfect. Each has weaknesses that distort reality.

The nominal value quickly becomes obsolete. Its interpretive scope is very short and offers little operational value in modern equity markets.

The book value suffers from three main problems. First, it is inefficient for valuing small companies or firms with many intangible assets (technology, brands, patents). Second, creative accounting can distort the real numbers. Third, it does not reflect the true accounting of companies with complex business models.

Market value is deeply influenced by uncertainty. Many non-financial variables drive it: aggressive monetary policy announcements depress prices, expansive fiscal policies raise them. A relevant sector event, a deterioration in macroeconomic expectations, or mere speculative euphoria can completely distort the relationship between price and actual value. The market constantly discounts or overinterprets data, creating temporary disconnects between what the stock is truly worth and what the market believes it is worth.

Your quick reference: comparison table

Conclusion: practical synthesis

All three values coexist in the market reality. Your job as an investor is to understand when each one is relevant for your specific strategy.

The nominal value provides historical context but not operational decisions. The book value is your compass for identifying potential undervaluations in long-term strategies, especially in established companies with clear balance sheets. The market value is your operational zone, where you execute your orders and set your entry and exit points.

True mastery lies in using these three lenses simultaneously, never in isolation. A good investment does not come from reading ratios out of context. It arises from combining accounting analysis (Is it undervalued in books?), market analysis (What is the real price and its trend?), and fundamental analysis (Does the company deserve that valuation?). Only then will you be in a position to make solid decisions in your portfolio.