Book Value Per Share Higher Is Better

Since preferred stockholders have a higher claim on assets and earnings than common shareholders.

Book value per share higher is better. When book value per share is high compared to a company s share price the company s stock is deemed as undervalued. Strictly speaking the higher the book value the more the share is worth. The book value is simply the company s assets minus its liabilities.

Introduction the price to book p b ratio is used to compare a company s market price to book value and is calculated by dividing price per share by book value per share. For example a company that is currently trading for 20 but has a book value of 10 is selling at twice its equity. 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 share price can be higher or lower then its book value. Book value is the value of an asset reported in the balance sheet of the firm. The price to book ratio measures a company s market price in relation to.

How book value per share works. Put another way book value per share rates the total shareholder s equity of a. The book value per share may be used by some investors to determine the equity in a company relative to the market value of the company which is the price of its stock.

Generally the book value per share is used by investors especially value investors to determine whether a share is fairly valued. It is calculated by multiplying the market price per share of the company with the number of outstanding shares. So higher book value means the shares have more liquidation value.

Every quarter a company declares the result and from that you can find the book value. Book value per common share bvps calculates the common stock per share book value of a firm. If the bvps is less than the price of the stock then that tells an investor that the stock could be overvalued it costs more than the assets it s entitled to.