How to interpret nominal value, real value, and book value in the stock market: a complete guide for investors

When analyzing a stock in the market, we encounter three different ways to evaluate it. Each uses different sources of information and offers unique perspectives on whether an investment is interesting or not. In this comprehensive guide, I will break down these three valuation methodologies, show you when to apply each one, and discuss the limitations of each approach.

The starting point: understanding the sources of each valuation

Before working with any model, we need to clarify where we extract each figure.

Nominal value arises from a simple operation: we take the company’s share capital and divide it by the total number of shares issued. It is the theoretical issuance price.

Practical example: BUBETA S.A. has a share capital of €6,500,000 and issued 500,000 shares. The calculation is straightforward: 6,500,000 ÷ 500,000 = €13 per share as the nominal value.

Book value or net book value requires more information. We calculate the difference between total assets and total liabilities, then divide that result by the number of shares issued. It reflects what accounting says the company is worth per share.

Example: MOYOTO S.A. has assets worth €7,500,000, liabilities of €2,410,000, and 580,000 shares issued. The operation is: (7,500,000 - 2,410,000) ÷ 580,000 = €8.775 as the book value.

Market value or real value is different. It is obtained by dividing the market capitalization by the number of shares. This figure constantly changes according to supply and demand in the secondary market.

Example: OCSOB S.A. has a market capitalization of €6,940 million with 3,020,000 shares: 6,940,000,000 ÷ 3,020,000 = €2,298 as the current market value.

What each method reveals about your potential investment

The fundamental difference lies in what each figure communicates.

Nominal value serves as a historical reference. It indicates the price at which the share was originally issued. In equity investing, its utility is limited because shares have no expiration date. However, it reappears when we talk about convertible bonds: hybrid instruments where the investor receives periodic interest and, at maturity, obtains shares at a predetermined price instead of capital repayment.

Book value is the key tool for those practicing value investing, the approach popularized by Warren Buffett. Its maxim is to buy quality companies at reasonable prices. By comparing the book value with the actual price, we identify whether a company is trading high or low relative to its accounting fundamentals. However, this methodology shows severe inefficiencies with tech companies and small caps, especially those with significant intangible assets.

Real or market value is what you see daily on your trading platform. It represents the market consensus at any given moment: what buyers and sellers are actually willing to pay. Unlike the book value, which says “this should be worth,” the market value says “this is worth now.” It will never tell you if the price is expensive or cheap; for that, you need additional ratios like the PER or a deep fundamental analysis.

Practical applications in your investment strategy

For nominal value: its practical application is very limited in daily operations. It becomes relevant mainly in convertible bond contexts, where the conversion price is set using specific formulas that may reference the nominal value as a calculation point.

For book value: it is essential in the value investing methodology. An investor applying this approach looks for two conditions simultaneously: a company with a solid balance sheet and a robust business model, and an attractive market price. Only invests when both are met.

The ratio Price/Book Value (P/VC) is your ally here. Let’s compare two gas companies in the IBEX 35: if ENAGAS shows a P/VC lower than NATURGY, it means the first offers a better price-to-fundamentals ratio, although of course this single ratio does not determine the final decision.

For market value: it is your daily operational compass. If you buy intending to sell at a higher price, you set your target profit based on this price. If you operate short-term, you set your loss limits at this level. You can use limit orders to buy when the price drops to levels you previously determine.

Remember that trading hours vary: Spain and Europe trade from 09:00 to 17:30; the US from 15:30 to 22:00; Japan from 02:00 to 08:00; China from 03:30 to 09:30 (Spanish hours). Outside these windows, you can only place pre-set orders.

Practical case: META PLATFORMS closes at $113.02 and anticipates further drops. You set a buy order for 5 lots without leverage with a limit at $109.00. If in the next session the stock rebounds and rises without touching that price, your order remains unfilled, protecting you from buying at undesired levels.

The real limitations of each approach

Nominal value: its main weakness is that it quickly becomes obsolete. It is only relevant at issuance and has almost no utility for modern equity trading.

Book value: produces unreliable results when valuing small companies with significant intangible assets (software, patents, brand). Additionally, creative accounting and potential irregularities can distort this value, although such situations are not frequent.

Market value: is deeply affected by uncertainty. The market discounts factors that may not have a direct relation to the company: changes in monetary policy, sector-specific relevant events, revisions of economic expectations, or simply collective euphoria in the sector. This leads to irrational overvaluation or undervaluation.

Quick comparative summary

Conclusion: context determines everything

Successful investing does not depend on mastering a single method but on knowing when to apply each within your specific context. Nominal and real value are different references with different purposes. Book value is powerful for detecting opportunities in value investing but needs to be complemented with other analyses. Market value reflects your daily operational reality but should never be your sole criterion.

The key is to interpret these three valuation types in an integrated manner, always considering the overall market context and the fundamentals of the company you analyze.