What does a stock's quoted value represent?
The quote price is simply the last price at which a trade completed. Price for the latest transaction. If the stock is selling for  $898.7 means that the stock is currently trading for  $898.7, and it will be your ask price of stock if you purchase currently. "Stock price is set to the price with the highest transaction volume at any given time.  The stock price you cited was only valid in the last transaction on a specific stock exchange. As such it is more of an ""historic"" value. Next trade will be done with the next biggest volume. Depending on the incoming bids and asks this could be higher or lower, but you can assume it will not be too far off if there is no crash underway. Simple example stock exchange:"
"Market caps is just the share price, multiplied by the number of shares. It doesn't represent any value (if people decide to pay more or less for the shares, the market cap goes up or down). It does represent what people think the company is worth.  NAV sounds very much like book value. It basically says ""how much cash would we end up with if we sold everything the company owns, paid back all the debt, and closed down the business? "" Since closing down the business is rarely a good idea, this underestimates the value of the business enormously. Take a hairdresser who owns nothing but a pair of scissors, but has a huge number of repeat customers, charges $200 for a haircut, and makes tons of money every year. The business has a huge value, but NAV = price of one pair of used scissors." The worth of a share of stocks may be defined as the present cash value of all future dividends and liquidations associated therewith.  Without a crystal ball, such worth may generally only be determined retrospectively, but even though it's generally not possible to know the precise worth of a stock in time for such information to be useful, it has a level of worth which is absolute and not--unlikely market price--is generally unaffected by people buying and selling the stock (except insofar as activities in company stock affect a company's ability to do business). If a particular share of stock is worth $10 by the above measure, but Joe sells it to Larry for $8, that means Joe gives Larry $2.  If Larry sells it to Fred $12, Fred gives Larry $2.  The only way Fred can come out ahead is if he finds someone else to give him $2 or more.  If Fred can sell it to Adam for $13, then Adam will give Fred $3, leaving Fred $1 better off than he would be if he hadn't bought the stock, but Adam will be $3 worse off. The key point is that if you sell something for less than it's worth, or buy something for more that it's worth, you give money away.  You might be able to convince other people to give you money in the same way you gave someone else money, but fundamentally the money has been given away, and it's not coming back. To be fair, the analyst is talking about the book value of the firm. Basically, the value of all the stuff it owns now. There are plenty of companies with negative book value that can justify a positive share price. Ford, for instance, had negative book value but positive future earnings. Large-scale price range of a stock isn't directly meaningful; that reflects how many shares exist, not just how desirable they are. A stock split, for example, doubles the number of shares everyone holds while cutting the value of each share in half; that's meaningless except that it makes the shares a bit easier to trade in. Change in price is more interesting. In the case of energy companies, that often reflects major changes in energy supply, distribution, use, or how well positioned people feel the company is for the next change in these. Fracking's surge and the questions raised against it, whether a major pipeline will or won't be built, international energy price trends, breakthroughs in renewables... if it might affect energy price, it might affect the company's strength, both absolute and relative to others. In other words, the same kinds of things that affect any stock. "You could not have two stocks both at $40, both with P/E 2, but one an EPS of $5 and the other $10.  EPS = Earnings Per Share P/E = Price per share/Earnings Per Share So, in your example, the stock with EPS of $5 has a P/E of 8, and the stock with an EPS of $10 has a P/E of 4.  So no, it's not valid way of looking at things, because your understanding of EPS and P/E is incorrect. Update: Ok, with that fixed, I think I understand your question better. This isn't a valid way of looking at P/E. You nailed one problem yourself at the end of the post: The tricky part is that you have to assume certain values remain   constant, I suppose But besides that, it still doesn't work. It seems to make sense in the context of investor psychology: if a stock is ""supposed to"" trade at a low P/E, like a utility, that it would stay at that low P/E, and thus a $1 worth of EPS increase would result in lower $$ price increase than a stock that was ""supposed to"" have a high P/E. And that would be true. But let's game it out: Scenario Say you have two stocks, ABC and XYZ. Both have $5 EPS. ABC is a utility, so it has a low P/E of 5, and thus trades at $25/share. XYZ is a high flying tech company, so it has a P/E of 10, thus trading at $50/share. If both companies increase their EPS by $1, to $6, and the P/Es remain the same, that means company ABC rises to $30, and company XYZ rises to $60. Hey! One went up $5, and the other $10, twice as much! That means XYZ was the better investment, right? Nope. You see, shares are not tokens, and you don't get an identical, arbitrary number of them. You make an investment, and that's in dollars. So, say you'd invested $1,000 in each. $1,000 in ABC buys you 40 shares. $1,000 in XYZ buys you 20 shares. Their EPS adds that buck, the shares rise to maintain P/E, and you have: ABC: $6 EPS at P/E 5 = $30/share. Position value = 40 shares x $30/share = $1,200 XYZ: $6 EPS at P/E 10 = $60/share. Position value = 20 shares x $60/share = $1,200 They both make you the exact same 20% profit. It makes sense when you think about it this way: a 20% increase in EPS is going to give you a 20% increase in price if the P/E is to remain constant. It doesn't matter what the dollar amount of the EPS or the share price is." "The value of a stock ultimately is related to the valuation of a corporation.  As part of the valuation, you can estimate the cash flows (discounted to present time) of the expected cash flows from owning a share.  This stock value is the so-called ""fundamental"" value of a stock.  What you are really asking is, how is the stock's market price and the fundamental value related?  And by asking this, you have implicitly assumed they are not the same.   The reason that the fundamental value and market price can diverge is that simply, most shareholders will not continue holding the stock for the lifespan of a company (indeed some companies have been around for centuries).  This means that without dividends or buybacks or liquidations or mergers/acquisitions, a typical shareholder cannot reasonably expect to recoup their share of the company's equity. In this case, the chief price driver is the aggregate expectation of buyers and sellers in the marketplace, not fundamental evaluation of the company's balance sheet.   Now obviously some expectations are based on fundamentals and expert opinions can differ, but even when all the experts agree roughly on the numbers, it may be that the market price is quite a ways away from their estimates.  An interesting example is given in this survey of behavioral finance.  It concerns Palm, a wholly-owned subsidiary of 3Com.  When Palm went public, its shares went for such a high price, they were significantly higher than 3Com's shares.  This mispricing persisted for several weeks. Note that this facet of pricing is often given short shrift in standard explanations of the stock market.  It seems despite decades of academic research (and Nobel prizes being handed out to behavioral economists), the knowledge has been slow to trickle down to laymen, although any observant person will realize something is amiss with the standard explanations.   For example, before 2012, the last time Apple paid out dividends was 1995.  Are we really to believe that people were pumping up Apple's stock price from 1995 to 2012 because they were waiting for dividends, or hoping for a merger or liquidation?  It doesn't seem plausible to me, especially since after Apple announced dividends that year, Apple stock ended up taking a deep dive, despite Wall Street analysts stating the company was doing better than ever.  That the stock price reflects expectations of the future cash flows from the stock is a thinly-disguised form of the Efficient Market Hypothesis (EMH), and there's a lot of evidence contrary to the EMH (see references in the previously-linked survey).  If you believe what happened in Apple's case was just a rational re-evaluation of Apple stock, then I think you must be a hard-core EMH advocate. Basically (and this is elaborated at length in the survey above), fundamentals and market pricing can become decoupled.  This is because there are frictions in the marketplace making it difficult for people to take advantage of the mispricing.  In some cases, this can go on for extended periods of time, possibly even years.  Part of the friction is caused by strong beliefs by market participants which can often shift pressure to supply or demand.  Two  popular sayings on Wall Street are, ""It doesn't matter if you're right.  You have to be right at the right time.""  and ""It doesn't matter if you're right, if the market disagrees with you.""  They suggest that you can make the right decision with where to put your money, but being ""right"" isn't what drives prices.  The market does what it does, and it's subject to the whims of its participants." The intrinsic value of a company is based on their profits year on year along with their expect future growth. A company may be posting losses, but if the market determines there's any chance they will turn a profit one day, or be a takeover target, it assigns value to those shares. In normal times, you'll observe a certain P/E range. Price to earning ratio is a simple way to say the I will pay X$ for a dollar's worth of earnings. A company that's in a flat market and not growing may command a P/E of only 10. Another company that's expanding their products and increasing market share may see a 20 P/E. Both P/Es are right for the type of company involved. "Oh, I understand now -- we're having an absurd, meaningless conversation about an obscure theoretical point.  When you can tell me how you can determine a ""minimum cash"" level from a public company's filings, we can continue the discussion.  Otherwise, make a simplifying assumption and move on.  I misunderstood -- I thought we were actually trying to understand the difference between enterprise value and equity value / understand the implication of an enterprise value multiple." It's been awhile since my last finance course, so school me here:  What is the market cap of a company actually supposed to represent? I get that it's the stock price X the # of shares, but what is that actually representing? Revenues? PV of all future revenues? PV of future cash flows?  In any case, good write up. Valuation of tech stocks is quite the gambit, and you've done a good job of dissecting it for a layman. Nobody tracks a single company's net assets on a daily basis, and stock prices are almost never derived directly from their assets (otherwise there would be no concept of 'growth stocks').  Stocks trade on the presumed current value of future positive cash flow, not on the value of their assets alone. Funds are totally different.  They own nothing but stocks and are valued on the basis on the value of those stocks.  (Commodity funds and closed funds muddy the picture somewhat, but basically a fund's only business is owning very liquid assets, not using their assets to produce wealth the way companies do.) A fund has no meaning other than the direct value of its assets.   Even companies which own and exploit large assets, like resource companies, are far more complicated than funds: e.g. gold mining or oil extracting companies derive most of their value from their physical holdings, but those holdings value depends on the moving price and assumed future price of the commodity and also on the operations (efficiency of extraction etc.) Still different from a fund which only owns very liquid assets. Stock price = Earning per share * P/E Ratio. Most of the time you will see in a listing the Stock price and the P/E ration. The calculation of the EPS is left as an exercise for the student Investor. "A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the ""future value"" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the ""present value"" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the ""end"", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest." "As I understand it, Implied Volatility represents the expected gyrations of an options contract over it's lifetime.  No, it represents that expected movement of the underlying stock, not the option itself.  Yes, the value of the option will move roughly in the same direction the value of the stock, but that's not what IV is measuring. I even tried staring at the math behind the Options pricing model to see if that could make more sense for me but that didn't help. That formula is correct for the Black-Scholes model - and it is not possible (or at least no one has done it yet) to solve for s to create a closed-form equation for implied volatility.  What most systems do to calculate implied volatility is plug in different values of s (standard deviation) until a value for the option is found that matches the quoted market value ($12.00 in this example).  That's why it's called ""implied"" volatility - the value is implied from market prices, not calculated directly. The thing that sticks out to me is that the ""last"" quoted price of $12 is outside of the bid-ask spread of $9.20 to $10.40, which tells me that the underlying stock has dropped significantly since the last actual trade.   If the Implied Vol is calculated based on the last executed trade, then whatever algorithm they used to solve for a volatility that match that price couldn't find a solution, which then choose to show as a 0% volatility.   In reality, the volatility is somewhere between the two neighbors of 56% and 97%, but with such a short time until expiry, there should be very little chance of the stock dropping below $27.50, and the value of the option should be somewhere around its intrinsic value (strike - stock price) of $9.18." Thanks to this youtube video I think I understood the required calculation. Based on following notation: then the formula to find x is: I found afterwards an example on IB site (click on the link 'How to Determine the Last Stock Price Before We Begin to Liquidate the Position') that corroborate the formula above. "Market cap is synonymous with equity value, which is one way of thinking of a company's ""worth.""  The alternative would be enterprise value, which is calculated as follows:  Enterprise Value = Market Value of Equity + Market Value of Debt - Cash and Equivalents - Non-Operating Assets  Enterprise value is essentially ""how much is the firm worth to ALL providers of capital."" It can be viewed as ""if I wanted to buy the *entire* company, debt and all, what would I have to pay?"""