Book Value Per Share Vs Market Value Per Share
As the company s expected growth and profitability increase the market value per share is expected to increase further.
Book value per share vs market value per share. Book value is equal to the value of the firm s equity while market value indicates the current market value of any firm or any asset. For example a company has a p b of. While book value per share is a good way to evaluate a stock it s more of an accounting based tool and doesn t necessarily reflect the true market value of a publicly traded company companies.
However on september 28 2018 two days prior to the end of the quarter the market. The price to book p b ratio is a popular way to compare market value and book value. If a p b ratio is less than one the shares are selling for less than.
A simple calculation dividing the company s current stock price by its stated book value per share gives you the p b ratio. Market value per share is the price of the equity share at which it can be freely traded amongst unrelated parties. Book value gives us the actual worth of the assets owned by the company whereas market value is the projected value of the firms or the assets worth in the market.
On the other hand book value per share is an accounting based tool that is calculated using historical costs. Unlike the market value per share the metric is not forward looking and it does not reflect the actual market value of a company s shares. With 436 084 995 outstanding shares at the end of that quarter the book value per share was only about 11 47.
The book value of equity per share bvps metric can be used by investors to gauge whether a stock price is undervalued by comparing it to the firm s market value per share. Book value per share is the price per equity share as per historic values reported in the financial statements of the company.