Corporate market value - public corporations
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Corporate market value - public corporations
The market value of public corporations depends on the share market. They fluctuate mainly between values that correspond with P/E ratio of 4 to 70. P/E ratio is the result of dividing the market value of the corporation by its profit in the last 12 months or the price of one share, divided by the average profit per share in the last 12 months.
Some corporations can have much higher P/E ratio, which means that the corporations are less profitable. The share price should go down but sometimes it does not because there are buyers for these shares.
Most share trading is done automatically by investment funds that are investing part of their cash in shares. These funds will not buy shares with a P/E ratio > 30 and they will start selling if the P/E ratio is > 50 or 60.
Players can buy at any price and some try to protect the value of their corporations by purchasing the shares that were offered on the market at any price to prevent them from falling.
The share market became more active recently and more trading is taking place. More small changes are underway that will force trading in all shares from time to time and by doing so, increase the chance that share pricing will move to the correct levels. Manipulation of the share price will become more difficult and more expensive.
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