Book Value Pricing Formula

The price to book value ratio p b formula is also referred to as a market to book ratio and measures the proportion between the market price for a share and the book value per share.

Book value pricing formula. It s calculated by dividing the company s stock price per share by its book value per share bvps. The book value per share is considered to be the total equity for common stockholders which can be found on a company s balance sheet. Here s the formula of price to book value price to book value ratio market price per share book value per share.

Book value per share will be bvps 495 61 book value calculator. You can use this book value calculator. An asset s book value is equal to its carrying value on the balance sheet and companies.

Therefore the calculation of book value per share will be as follows bvps total common shareholders equity preferred stock number of outstanding common shares 2 93 491 00 cr 592 18 cr. Price to book value market price per share book value per share. Assets book value formula total value of an asset depreciation other expenses directly related to it total value of the asset value at which the asset is purchased depreciation periodic reduction in the value of the asset amortized as per standards.

If the price is less than the book value it is a good bargain. Comparison of p b is generally done between the peer group and industry average. Book value of equity formula it is calculated by adding the owner s capital contribution treasury shares retained earnings and accumulated other incomes.

Price to book value is the second most important metric in determining the fair price of a share the first being price to earnings pe ratio. Mathematically it is represented as book value of equity formula owner s contribution treasury shares retained earnings accumulated other incomes. The stock price per share can be found as the amount listed as such through the secondary stock market.

Company x has a p b lower than the industry average and lower than its peer group which highlights that x might be undervalued.