Book Value Per Share Greater Than Stock Price

The higher the price to book ratio the.

Book value per share greater than stock price. The book value per share is a little more complicated. The following day the market price zooms higher and creates a p b ratio of greater than 1 meaning market value now exceeds book value. The market price per share is simply the current stock price that the company is being traded at on the open market.

Price to book ratio is used to compare a stock s market value to its book value and it is calculated by dividing the stock price by the book value per share. But for exceptionally good companies specially for debt free high growth companies like eicher motors stock is trading nearly 10 times of the book value. Book value networth nos of shares.

Conversely a stock with a ratio greater than one can. The price to book p b ratio is a popular way to compare market value and book value. In general traditional good companies are trading at 3 to 4 times of book value.

Dividing that 1 billion by the 100 million outstanding shares gives us a per share book value of 10. Finally we divide the current share price of 15 by that 10 to reach a price to book. Networth share capital reserve surplus.

A p b ratio of less than one means that the stock is trading at less than its book value or the stock is undervalued and therefore a good buy. We first subtract the total liabilities from the total assets and divide the difference by the total number of shares outstanding on that date. Book value is historical where as stock pricing is dynamic and determine by demand and supply and discounting principle bit confusing let me clear it assume a company which is listed in stock market and into business of real estate incorporated.

Many investors rephrase this equation to form the book to market ratio formula by dividing the total book value of the firm by the total market value of the company. An important measure of value is the book value per share total assets minus intangible assets and liabilities divided by the number of outstanding shares. For example a company has a p b of.