What Is a Value Change?
The term value change refers to a daily adjustment made to the price of a company's stock. This change reflects the number of outstanding shares issued and currently held by investors. This figure is updated on a daily basis. Since the number of shares held by investors changes daily, this number can be updated every day to reflect the changes. It allows a group of stocks to be equally weighted and more easily evaluated by investors, analysts, and other financial professionals.
- A value change is a daily adjustment made to a stock's price.
- The change reflects the number of outstanding shares issued and currently held by investors.
- The figure is updated on a daily basis.
- Value changes are the result of a number of factors, including supply and demand.
- This figure can be used to weigh individual stocks in a group or category equally.
How Value Changes Work
People often confuse a stock's value with its price. It's common for individuals to believe they're one and the same. While that's true to a certain degree, there are some key differences between the two. The price of a stock indicates its current or present value in the market. Put simply, it indicates what the stock trades at or what it costs at any given moment in time.
Value, on the other hand, refers to the actual worth of an asset, including a stock. The stock's value is determined by factors, such as market share, earnings, and a number of other metrics. The price of a stock is normally at the same level or near its intrinsic value. But changes can arise when the market rises or drops.
As noted above, a value change is reflective of the total number of outstanding shares issued and currently held by investors. As such, it describes a type of calculation used to compare and evaluate investment instruments by taking the number of shares held by investors into consideration. And since shares change hands every day, the value change of a company's stock also changes daily.
One of the main reasons that the value change adjustment is so important is because it is intended to equally weigh individual stocks that are included in a group or category. For instance, investors can group together a number of stocks in the financial industry, consumer staples, or retail sector and determine the value change of one company's stock compared to its peers.
The total number of outstanding shares doesn't include stock that has been reinvested by the company.
Example of Value Change
Let's use a hypothetical example to show how value changes work. Suppose XYZ company has one million shares outstanding in the public market and decides to issue an additional million shares. These shares will be issued to investors on the secondary market. By doing this, the company's stock price may undergo a value change. That's because of the significant change caused by the doubling of the total number of outstanding shares.