Book Value Per Share Ratio Meaning

Comparing bvps to a stock s market price could help value investors find opportunities. For example if the bvps is 20 per share and the market value of the same common share is 30 per share the investor can find out the ratio of price to book value as price book value 30 20 1 5. 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.

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The two measures are based upon different information.

Book value per share ratio meaning. What does book value per share mean. Unlike the pb ratio the mb formula compares values on a company wide basis. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.

Companies use the price to book ratio p b ratio to compare a firm s market capitalization to its book value. Conversely the book value per share is an accounting measure that is not forward looking at all. In the case that the firm dissolves it is the amount the shareholders will receive.

The term book value is a company s assets minus its liabilities and is sometimes referred to as stockholder s equity owner s equity shareholder s equity or simply equity. Book value per share bvps is a ratio used to compare a firm s common shareholder s equity to the number of shares outstanding. At the same time we use book value in the case of roe formula when we calculate the roe per share.

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. Book value per share is a fairly conservative way to measure a stock s value. Consequently it is dangerous to compare the two measures.

Book value per common share or simply book value per share bvps is a method to calculate the per share book value of a company based on common shareholders equity in the company. When compared to the current market value per share the book value per share can provide information on how a company s stock is valued. Book value per.

The market value per share is a forward looking measure of what the investment community believes a company s shares are worth. It s calculated by dividing the company s stock price per share by its book value per. What is the definition of book value per shares.