fair value

The price that an asset is determined to be worth. Fair value is the maximum price a buyer should consider paying and the minimum price a seller should consider accepting. The fair value of a stock is often derived by examining the company’s financial statements and looking at macroeconomic factors. Valuation techniques are then used to compare the stock’s calculated fair value to its current market price to help with investment decisions. Some define fair value as the equilibrium between the perceptions of buyers and sellers, and others define it as the discounted value of future cash flows adjusted for inflation and risk.