According to Investopedia, the market value represents the value of a company according to the stock market. It is the price an asset would get in the marketplace.
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks.
The stock market capitalization-to-GDP ratio is also known as the Buffett Indicator—after investor Warren Buffett, who popularized its use.
It is calculated by dividing the stock market cap by gross domestic product (GDP).
The P/E ratio helps investors determine the market value of a stock as compared to the company’s earnings.
In short, the P/E ratio shows what the market is willing to pay today for a stock based on its past or future earnings.
In this video, Warren Buffett talks about how he does market valuation. He suggests that both GDP and P/E are actually not the most important factors.
Warning: This video is to show you Buffett’s opinion about how to do market valuation. Please do your research before doing any investment. A good balance between return and risk is the key to investment success.
Source: Finance Jane
