Book value per share bvps overview, formula, example. The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders. How to calculate price per share of common stock sciencing. Book value per share bvps is a ratio used to compare a firms common shareholders equity to the number of shares outstanding. Book value per common share bvps definition investopedia. Apr 18, 2018 definition of book value book value as the name suggests, is the value of the company as per its books i. Book value is often used interchangeably with net book value or carrying value, which is the original acquisition cost less accumulated depreciation, depletion or amortization. Book value per share bvps is a measure of value of a companys common share based on book value of the shareholders equity of the company. Divide book value by the number of shares to get book value per share. Calculating earnings per share gives investors an estimate of what the company should be worth. An accounting term that measures the intrinsic value of a single share of a companys stock.
The ratio of stockholder equity to the average number of common shares. Book value is a companys net asset value, which is calculated by total assets minus intangible assets and liabilities. Im really lost here could someone please show me the steps. Book value per share compares the amount of stockholders equity to the number of shares. If the company shares are priced much higher than the book value per share, than the stock price might be too high for purchase. Aug 17, 2019 the book value per share is a market value ratio that weighs stockholders equity against shares outstanding. The formula for book value per share is to subtract preferred stock from stockholders equity, and divide by the average number of shares outstanding. Dec 15, 2009 15 december 2009 suraj diamonds face value of share rs.
Book value per share is the gaap number number of shares outstanding. How to calculate book value per ordinary share definition. Here we discuss how to calculate bvps step by step along with practical examples and excel templates. The simplest explanation i can give is that it tells potential investors how much their shares would be worth in the event the company in question goes out of business. Online finance calculator which helps to calculate the book value per share from the values of stack holders equity, preferred stock and total outstanding shares. Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. In case of dissolution of the company, the book value per common share refers to the remaining amount to be shared by the common shareholders after the liquidation of all assets and. Apr 15, 2020 book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. This interpretation is simplistic and deeper analysis is recommended. What does book value per share explain about the business. Breakup value financial definition of breakup value. B we used the average number of shares outstanding because the closing period amount may skew results if there was a stock issuance or major stock buyouts. If the market value per share is lower than the book value per share, then the stock price may be undervalued. Book value per share indicates the book value or accounting value of each share of stock.
View book value per share for tot access over 100 stock metrics like beta, evebitda, pe10, free cash flow yield, kz index and cash conversion cycle. Book value of equity per share bvps is a ratio that divides common equity value by the number of common stock shares outstanding. Keep in mind that the book value per share will not be the same as the market value per share. I am borrowing extracts from my previous posts to make this answer complete. Book value per share financial definition of book value per share. May 22, 2019 the formula for book value per share is to subtract preferred stock from stockholders equity, and divide by the average number of shares outstanding. The formulas and examples for calculating book value per share with and without preferred stock are given below. Book value per share definition the business professor. It is calculated by the company as shareholders equity book value divided by the number of shares outstanding. View book value per share for bp access over 100 stock metrics like beta, evebitda, pe10, free cash flow yield, kz index and cash conversion cycle.
Book value per share formula with calculator financial formulas. Relating book value per share to market price a favoured tool of value investors is the pb ratio. Although the book value of equity per share is a factor that can be used by the investors to determine the value of stock, it presents only a. Book value per share represents equity of the firm on per share basis. Shares outstanding are the number shares that have been issued. Ps can also be determined by dividing the price of a stock per share by pershare revenue. Find the latest book value per share for amazoncom inc amzn. May 29, 2019 book value is an assets original cost, less any accumulated depreciation and impairment charges that have been subsequently incurred. When the purchase price per share is less than book value per share, then the denominator of book value per share decreases by a greater percentage than does the numerator, and book value per share increases. The book value of a company divided by the number of shares outstanding. If the breakup value of a firm exceeds the market value at which its stock trades, the firm may be managed and operated inefficiently.
Book value is calculated by totaling the companys assets, subtracting all debts, liabilities, and the liquidation price of preferred stock, then dividing the result by the number of outstanding shares of common stock. A tangible book value per share tbvps is a method of valuing a company on a per share basis by measuring its equity after removing any intangible assets. The book value per share is the value each share would be worth if the company were to be liquidated, all the bills paid, and the assets distributed. Book value per share of common stock explanation, formula. How do i interpret pricebook and book value per share on. The market value of all the individual parts of a firm if the firm were to be broken up and the individual parts operated independently. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the book value of its assets and pays liabilities at their book value. This is a percentage of the current price of a share. Thus, this measure is a possible indicator of the value of a companys stock. The number of dividends paid to stockholders versus the companys total net income. This compares a stocks book value to its market value. The book value of equity per share is a financial measure which indicates a per share estimation of the minimum value of an entitys equity. The tbv excludes a firms intellectual property, patents, and trademarks because these are intangible assets that cannot be easily sold such as property, plant, and equipment.
In other words, the value of all shares divided by the number of shares issued. This calculation is often modified to exclude intangible assets, because they are not readily convertible to cash, in which case the calculation is called the tangible book value per share. Book value per share financial ratio the balance small business. This represents the intrinsic value of the company as a going concern. The formulas and examples for calculating book value per share. Mostly, the book value is calculated for common stock only. This is a financial measure of a per share assessment of the minimum value of a companys equity. Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each share after all debts are paid accordingly.
Jan 29, 2018 ps can also be determined by dividing the price of a stock per share by per share revenue. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the. The term book value is a companys assets minus its liabilities and is sometimes referred to as stockholders equity, owners equity, shareholders equity, or simply equity. A relatively high book value per share in relation to stock price often occurs when a stock is undervalued.
For the purpose of analysis, the book value of equity is further divided by a total number of shares to make book value per share. The book value per common share formula below is an accounting. Book value per share bvps is the minimum cash value of a company and its equity. Assume, for example, that xyz manufacturings common equity. Book value of an asset refers to the value of an asset when depreciation is accounted for. Therefore, it makes sense to use book value per share as a measure of the value of the company to the shareholders. A tangible book value per share tbvps is a method of valuing a company on a pershare basis by measuring its equity after removing any. To define net book value, it can be rightly stated that it is the value at which the assets of a company are carried on its balance sheet. Dec 29, 2015 the simplest explanation i can give is that it tells potential investors how much their shares would be worth in the event the company in question goes out of business. Book value per share calculator for common stock finance. It expresses the minimum value that would be available.
Book value per share how is book value per share abbreviated. It is the value that companys shareholders would receive after company liquidate all its assets and satisfy all its shortterm and longterm liabilities. During the past 3 years, the average book value per. Book value per share compares the amount of stockholders equity to the number of shares outstanding. Find the latest book value per share for verizon communications inc. Here is the calculation of the book value per share. How to calculate par value in financial accounting the.
Book value per share bvps takes the ratio of a firms common equity. Book value per share is a measure utilized by owners of mutual shares in a company to analyze the level of safety related with every individual share after all debts are paid appropriately. Be sure to use the average number of shares, since the periodend amount may incorporate a recent stock buyback or issuance, which will skew the results. Given the following information, calculate the book value per share. Stocks that use large amounts of capital, such as car and steel companies, often trade as a percent of book value. Depreciation is the reduction of an items value over time. Carter mcbride started writing in 2007 with cmbas ip section. Often, book value is expressed on a pershare basis, dividing the total shareholder equity by the number of shares of stock outstanding. Book value per share formula, calculator and example. Book value per share formula how to calculate bvps. Book value is the term which means the value of the firm as per the books of the company. Treasury stock 2,000 common shares at cost 20,000 total.
Book value is the net asset value of the company according to standard accounting practice gaap, audited. Book value per share is a widely used stock evaluation measure. The presence of preferred stock in the total stockholders equity, however, has a significant impact on the calculation. One reason is that a corporations stockholders equity is simply the difference between the total amount of assets reported on the balance sheet and the total amount of liabilities reported. This means if the company dissolves, the shareholders will receive an amount per share as per book value per share. The term book value is a companys assets minus its liabilities and is sometimes referred to as stockholders equity, owners equity, shareholders equity, or. The net book value can be defined in simple words as the net value of an asset. Should the company decide to dissolve, the book value per common share indicates the dollar value remaining for common shareholders after all assets are. The book values of assets are routinely compared to market values as part of various financial analyses. The book value per share formula is used to calculate the per share value of a company. The book value per share is a market value ratio that weighs stockholders equity against shares outstanding. For example, enterprise value would look at the market value of the. Book value per share is a market value ratio used for accounting purposes by financial managers or.
A low pb ratio is commonly taken to indicate value whilst a high pb ratio is taken to indicate a growth stock. I have already explained few terms in my previous answers. Book value per share equals total assets minus total liabilities divided by total outstanding shares. Jan 30, 2018 book value per share bvps is a measure of value of a companys common share based on book value of the shareholders equity of the company. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. Often, book value is expressed on a per share basis, dividing the total shareholder equity by the number of shares of stock outstanding. Priceearnings ratio is a good tool for comparing the value of competing companies. In the case that the firm dissolves, it is the amount the shareholders will receive. Book value of equity meaning, formula, calculation. Mar 28, 2017 book value per share equals total assets minus total liabilities divided by total outstanding shares. The company is not a dead company and it is growing. Growth rate is how much a companys equity is growing over the year. Divide the market value per share by the book value per share to calculate market to book ratio. Book value is a useful tool for evaluating the market value per share.
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