Price is observable; value is estimated — and honest estimates are ranges.
Price is observable. Value is estimated. Two investors can agree on every historical fact and still disagree about value because they use different assumptions about growth, margins, risk, competition, regulation, or future supply.
| Concept | Explanation | |---|---| | Market price | Current level at which buyers and sellers transact. | | Intrinsic value | Estimated present value of future economic benefits. | | Relative value | Value assessed by comparison with similar assets. | | Fair value range | A range reflecting uncertainty rather than one precise number. | | Margin of safety | Difference between market price and a conservative value estimate. |
A high-quality business can be a poor investment if its price assumes unrealistic success. A weak business can appear statistically cheap while continuing to deteriorate.