Book Value Per Share Significance

Comparing bvps to a stock s market price could help value investors find opportunities.

Book value per share significance. 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. But value investors tend to find book value a good starting point to investigating a company especially if the per share stock price crosses below that company s book value. Book value per share is a fairly conservative way to measure a stock s value.

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. It is mainly the difference between the book value of assets and the book value of liabilities which is largely determined by accounting conventions. Book value is the total amount of company s physical assets excluding patents goodwill minus liabilities.

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. For example a company that is currently trading for 20 but has a book value of 10 is selling at twice its equity. The information needed to calculate bvps is found on a company s balance sheet.

When a stock is undervalued it will have a higher book value. The book value of a company is the difference in value between that company s total assets and total liabilities on its balance sheet. Use of book value per share.

Value investors use the price to book p b ratio to compare a. Price to book value price per share book value of equity per share book value of equity is the theoretical value of what a company s net assets are worth. Book value of equity per share effectively indicates a firm s net asset value total assets total liabilities on a per share basis.