What is CMP in Share Market?

CMP stand for Current Market Price. The current price also known as CMP of a stock, currency, commodity, or precious metal is the most reliable indicator of its value at the present time, as it reflects the last selling price at which the stock, commodity  was being traded on an exchange.

Current price is the most recent price at which a securities was sold on an exchange. Buyers and sellers can use the current price as a reference point. The current price is a good indicative of value, but the actual selling price could be greater or lower depending on market conditions in the following transaction and the most important Demand and supply.

CMP and other metrics are equally important for Investors and IntraDa

Understanding CMP (Current Market Price) :

The current pricing serves as a benchmark but is not a guarantee. The current price does not determine the future sale price on an exchange. The security's price will constantly fluctuate as a result of changes in supply and demand. In a listing in an investment portfolio, the current price represents the value at a stated date.

[ Important point to noted :-  Prices on the market are not computed. Instead, they result from the offer and settlement between buyers and sellers in response to market forces.

According to economic theory, the market price tends to approach a point of equilibrium where the number of sellers, or supply, and the number of customers, or demand, are equal. If the number of purchasers increases, the price will rise. If the number of customers decreases or the number of sellers rises, the price tends to decrease.

It is essential to differentiate between the market price and book value per share of common stock. Book value is the accounting value of shareholders' equity after liabilities and assets are removed from the company's balance sheet assets.

The book value per share of common stock is determined by subtracting the value of any preferred stock from shareholders' equity and dividing the remaining amount by the number of outstanding common shares.

How to calculate CMP (Current Market Price) ?

This calculation of market value ratios will help investors decide if a stock is a good investment at that price.

Most of the time, you just look up the stock's current market price. Sometimes, you may need to know what prices were on the market in the past, but they may not be easy to find. This can happen when you are looking into a stock and want to know how the price has changed over time.

The Price/Earnings (P/E) ratio can be used to estimate the  historical market price. A common way to figure out the P/E ratio is to divide the market price (CMP) at a certain date by the earnings per share for the accounting period.
In other way find the P/E ratio and earnings per share in the company's annual report for the accounting period. Later, multiply the P/E ratio into EPS (Earning Per Share) This will give you an idea of the market price at that time.

For example, if the P/E ratio is 20 and the company's EPS was $7.50, the estimated market price for each share is $150. In other words, this is the price per share you would expect to pay if everything else were the same.

What does CMP and other related ratios indicate?

The market price per share of common stock is used in a number of financial ratios. Investors often use these ratios to figure out if a stock is overvalued or undervalued. If the stock is undervalued, it may be a good time to buy it at a low price.

Here are couple of examples:

The P/E ratio is the market price (CMP) ratio that is used the most. It tells you how much money you have to put in to earn $1. The best way to use the P/E ratio is to compare companies in the same industry.

For instance, tech companies may have high growth rates, which means that investors will pay more for their shares. In this case, a stock's high P/E ratio doesn't always mean it's overpriced. On the other hand, a utility may have steady earnings but little room for growth. Most companies in this industry have a P/E ratio that isn't too high.

The price to book value ratio tells you how much equity you get for every dollar you invest. P/BV is found by dividing the market price of a stock by its book value.

A stock that costs $100 per share and has a book value of $50 has a P/BV of 2. Many investors think that if the P/BV is less than 1, the stock might be a good deal. But you should pay close attention to other signs, like earnings per share, to make sure that the low price is really a good deal and not a sign that the company is having trouble.

What determine the Market price (CMP) ?

The price of an item on a market depends on how demand and supply work together. The willingness of buyers and sellers to buy and sell is shown by demand and supply. When buyers and sellers agree on a price, they initiate the trade.

Let look at Supply and demand curve to get idea about

Demand and supply curve

  • Equilibrium Point is the point where both buyers and sellers are willing to exchange the quantity Q at the price P. At this point, supply and demand are in balance. Price determination depends equally on demand and supply.
  • If we keep demand curve fixed and shifts Supply line towards right the conditions is Demand is fixed and supply increases i.e. more sellers than buyers so price will gradually decrease.
  • Again keeping the Demand line fixed and shifting the supply line towards left, the conditions is Demand is Fixed and supply decreases i.e. more buyers the sellers. So this will increase the price.
  • Now we will fix the supply line and shift the the demand line towards right then the situation will be Supply fixed and demand more so we can say that more buyers and less sellers, this will create hike in price.
  • And lastly Fixing the supply line and shifting the demand line towards left the situation will be demand is less and supply is same so less buyers than sellers and this will create a decline in price.

For detail knowledge on Demand and Supply theory refer: Effect of CMP due to Supply and Demand.

 

What is CMP in trading?

CMP in trading is the Current Market Price of the share, Stocks based on the last traded price.

What is full form of CMP?

The full form of CMP is Current Market Price.

What is Current Price in Market Bond?

Bond prices are calculated by comparing the current interest rate to the interest rate linked with the bid. The amount of interest still owed before the bond matures determines the new par value. If a bond's maturity date is approaching, its current price will be closer to its face value.

What is Current Price in Retail Sales?

The current price of an item in a store is the price at which it is being sold. The current price will be significantly lower than the retail price if the item is currently on sale.

What is difference between LTP and CMP ?

LTP stands for Last Traded Price and CMP stands for Current Market price. In short we can say that LTP is the price on which the trade was done for the Last transaction but CMP as the name indicates is current price or current offer price so its not sure trade will be pperformed at CMP.

Where to find CMP of a company?

CMP is available for the listed companies on the Exchanges.

CMP is not fixed it keeps on changing.

What are different types of Orders with CMP ?
  1. Market Order :- Market order simply means to place an order with a broker to instantly buy or sell shares at whatever current market price is trading at.
  2. Limit Order:- When an investor makes a limit order, he instructs his broker to purchase or sell shares at a specific price. Therefore, placing a limit order also indicates to your broker the minimum purchase price and maximum selling price.
  3. Stop Order:- As the name suggests, in this form of order an investor instructs his broker to buy or sell shares if the stock price falls below or rises above a specified price.

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