Price vs. Value – Why the Price Doesn’t Tell the Whole Story
Smarter than Bull & Bear.
Most people look at the price first – and automatically assume it tells the truth. If it goes up, things must be going “well”. If it drops, “something bad” must have happened.
The problem: The price on the stock market is only what is being paid right now – not automatically what something is worth.
In this post, we’ll look at how you can separate price from value – and why that matters if you want to invest more calmly.
In 30 seconds – here’s what you’ll take away
Price ≠ value: The share price is the result of supply, demand, expectations and emotions – not the objective truth about a business.
Value is an estimate: The intrinsic value of a company is a cautious estimate of its economic strength and future – not an exact point.
Margin of safety: Value investing means ideally paying less than you consider reasonable – with a deliberate buffer, because you know you can be wrong.
Why we confuse price with truth so easily
When you open a stock, the first thing you see is the price.
Not the profits of the last years. Not the balance sheet. Not the business model.
Just a number.
This number changes by the second, is visible everywhere and constantly commented on. Our brain gets used to reading the price like a live “health status” of the company.
Price up → “Things are going well.”
Price down → “Something must be wrong.”
But it’s not that simple.
Short‑term price moves often say more about sentiment than about substance.
What the price on the stock market really is
The price on the stock market is first and foremost this: the point where enough buyers and sellers meet right now.
Behind that point, there are many drivers:
expectations about future growth,
views on risks,
constraints (e.g. funds that have to buy or sell),
emotions like fear, greed, impatience.
So the price is a kind of “market opinion in this moment” – but no guarantee that this opinion is correct.
There are phases where companies work solidly for years – while their share prices swing wildly. And phases where the price goes up even though the underlying foundation is very thin.
The price is visible, loud and precise.
The value is quieter, more hidden – and always only an estimate.
What we mean by “value”
When value investors talk about value, they don’t mean a number from the price chart. They mean a careful estimate of one central question:
“How much money can this company probably earn over many years – and how reliable is that?”
To build an estimate of intrinsic value from that, they roughly look at a few key things:
How high profits or free cash flows could roughly be in the future.
How long these cash flows can continue in a similar range (or grow moderately).
What minimum return these future cash flows should be discounted with today – i.e. what annual return you would at least expect from this investment.
Which balance sheet effects need to be taken into account – for example excess cash or non‑operating assets on the plus side, and financial debt or other obligations on the minus side.
How many shares are outstanding, so you can turn the company value into an intrinsic value per share.
From these points you build a cautious estimate of intrinsic value. In practice you end up with a number – but honestly, it’s always just an approximation, never “the one true value”.
If this sounds like a lot of moving parts: you don’t have to calculate all of this in your head or dig it out of ten different sources.
What matters more is the basic idea: it’s about judging a company not only by the current price, but by its economic strength and ability to create value in the future.
That’s exactly where the elephantz app wants to help – by bundling key metrics, putting them into context and structuring them around this kind of framework.
Three typical situations – and what they can mean
Once you separate price and value, you can roughly imagine three situations:
Price clearly above estimated value
The market is very optimistic. A lot of good news and expectations are already priced in.
→ Even a great business can be a risky investment if everything would have to go perfectly for the current price to be justified long term.Price roughly in line with estimated value
The market is trading around where you cautiously estimate intrinsic value (within a range).
→ Here your long‑term return will roughly mirror the company’s own value creation.Price clearly below cautiously estimated value
The market is very pessimistic or has priced in issues you see as less dramatic – or it simply focuses on different things than you do.
→ There may be an opportunity here – if your analysis holds up and you understand why the market is so pessimistic right now.
Important:
This is not a call to “hunt bargains”, but a way to classify situations more consciously.
Why the margin of safety matters so much
Even with solid preparation, one thing remains true: nobody knows the future.
Forecasts can be wrong.
Business models can come under pressure.
Conditions (rates, regulation, competition) can change.
That’s why value investors work with the idea of a margin of safety.
The idea behind it:
You try to estimate a company’s value conservatively.
And you don’t want to pay the full estimated value.
Instead, you want to buy with a deliberate discount – a buffer.
The margin of safety is not a magic single percentage, but more of an attitude:
“I don’t assume I see everything perfectly. So I deliberately leave room for mistakes and surprises.”
The more uncertainty there is, the larger the margin of safety you want.
In practice, many value investors aim for something like a 20–30% discount on their cautious estimate of value for more stable businesses – and a clearly larger buffer for companies with more uncertainty or risk.
Not as a hard rule, but as a rough orientation: the shakier the picture, the more margin of safety you want.
Myth vs. fact
Myth: “The market is always right.”
Fact: The market is often helpful, but not infallible. Sometimes it offers good prices – in both directions.
Myth: “If the price drops, you were wrong.”
Fact: Short‑term price moves say little about whether your analysis made sense. What matters is whether the business performancestill fits your long‑term view.
What this means for you
You don’t have to be a pro to separate price and value more consciously. These questions can already help:
What is the market paying for what, exactly?
Do I see a solid business with a clear model – or mainly a story?Does the price feel more cautious or very ambitious?
Does it look like a lot of perfect future is already priced in – or more like a lot of doubt?Do I have a margin of safety – or am I buying on a knife’s edge?
If I’m wrong or it takes longer than I think: do I have enough buffer – financially and emotionally?
The goal is not to value every stock “perfectly”.
The goal is to decide more consciously – and be less driven by short‑term price moves.
How elephantz works with price & value
Often the challenge with value investing is not the idea itself – but the day‑to‑day implementation.
Typical hurdles:
information is scattered,
metrics come without context,
there’s no clear framework to think about quality, price and risk together.
This is exactly where the elephantz app wants to help:
It bundles company fundamentals and market data in one place.
It helps you make business quality (business model, earnings power, balance sheet, capital returns) more tangible.
It puts valuation metrics into a framework inspired by value‑investing principles.
It makes the idea of a margin of safety more visible – without telling you what to buy.
In short:
We want to help you separate price and value more clearly, so you can decide more calmly.
Less noise. More substance.
We structure, show, explain – you make the decision.
If you’d like to keep following along
In the next posts, we’ll go deeper into other building blocks of value investing, for example:
how to judge business quality without drowning in metrics,
which typical traps at the stock market keep repeating,
how we bring these principles step by step into the elephantz app.
👉 Learn more about the app & beta pre‑registration at elephantz.
Disclaimer: No investment advice. Content is for informational and educational purposes only.