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– Business results. If the business is profitable, part of the profit is reinvested, tangible assets will increase, intrinsic value will increase accordingly. On the contrary, if there is a loss, tangible assets decrease, the intrinsic value decreases. This increase or decrease is recognized through changes in assets and equity in the accounting books and financial statements.
– The formation of intangible assets (brands, trademarks, inventions, inventions, human resources, corporate reputation…). This factor occurs in the course of doing business, but is difficult to cash in as a tangible asset and therefore is often not reflected or reflected incorrectly in the financial statements. However, it has a very strong impact on business results.
– The stock market price fluctuates around the intrinsic value, but in a certain period, the market price may be higher or lower than the intrinsic value. Intrinsic value is the basic factor determining the market price, but in addition to it, there are many other factors outside the scope of the business such as economic, political, social situation at home and abroad, even psychological factors. and the subjective assessment of investors also has a great impact.
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In theory, if the market price is lower than the intrinsic value, investors should buy and vice versa. Because after a while, the market price will reflect the intrinsic value. In practice, however, sometimes that doesn’t happen. In addition, even at times that are considered ideal to buy, professional investors can still deduce that the market price is already very cheap compared to its intrinsic value, compared to the previous time. here, but it probably won’t be cheaper than tomorrow or next week. This will increase the deviation between market price and intrinsic value.
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