Book Value Per Share Lower Than Share Price

For example a company has a p b of.

Book value per share lower than share price. It may be factored into a general investigation of what the. A simple calculation dividing the company s current stock price by its stated book value per share gives you the p b ratio. If a p b ratio is less than one the shares are selling for less than the.

Calculating the effect of share repurchases on bvps. The book value of a company stripped to basics is the value of the company the stockholders will own if the firm s. In the first way the company s market capitalization can be divided by the company s total book value from its balance sheet the second way using per share values is to divide.

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. The price to book p b ratio is a popular way to compare market value and book value. Thus this measure is a possible indicator of the value of a company s stock.

Why it is static because for a going concern it is not required to assess its value periodically once it is acquired so until its value is redefined it will shows the price as it is on the books of the company but share price reflects actual worth and if a company has price which is higher than the book price it is a wealth creator for share holder and reverse a wealth destructor. An example will explain this concept best. Apple stock closed on june 29 2018 at 185 11 per share.

Likewise a company s book value per share will decrease after a share repurchase if the market price per share was greater than the book value per share prior to the repurchase. If the price tobook value per share is. Book value per share is a ratio that compares the net asset value of a company minus preferred equity to the total number of common shares available on the market.

About 4 8 billion shares were outstanding at the time so the book value per share was about 23 96 per share. The price to book ratio or p b ratio is a financial ratio used to compare a company s current market price to its book value the calculation can be performed in two ways but the result should be the same each way. Comparing bvps to a stock s market price could help value investors find opportunities.