What Does Book Value Per Share Tell You

The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.

What does book value per share tell you. 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. For example a company that is currently trading for 20 but has a book value of 10 is selling at twice its equity. The simplest explanation i can give is that it tells potential investors how much their shares would be worth in the event the company in question goes out of business.

Book value per share is a fairly conservative way to measure a stock s value. Book value per share is a way to measure the net asset value investors get when they buy a share. The price to book p b ratio is a popular way to compare book and market values and a lower ratio.

What is the book value per share bvps. The information needed to calculate bvps is found on a company s balance sheet. 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 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. In case the company does encounter such an event all assets are liquidated in. 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.

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

If a p b ratio is less than one the shares are selling for less than the.