During the past 5 years, the average book value per share growth rate was 41. Aug 17, 2019 the book value per share is a market value ratio that weighs stockholders equity against shares outstanding. Book value per share tells investors what a banks, or any stocks, book value is on a pershare basis. The market value of a company is how much an acquirer would have to pay to buy all the shares of the company on the open market i. A tangible book value per share tbvps is a method of valuing a company on a pershare basis by measuring its equity after removing any. Thats been supportive to the market as a whole, since when companies reduce their outstanding share count by repurchasing units, it lifts the pershare value of the remaining stock. Although the book value of equity per share is a factor that can be used by the investors to determine the value of stock, it presents only a limited value of the firms situation. Book value per share formula with calculator financial formulas. Book value per share financial definition of book value. Growth rate is how much a companys equity is growing over the year. Jan 29, 2018 book value appeals more to value investors who look at the relationship to the stocks price by using the price to book ratio. It relates the market price of a stock to its book value.
The book value is essentially the tangible accounting value of a firm compared to the market value that is shown. Apr 15, 2020 book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Relating book value per share to market price a favoured tool of value investors is the pb ratio. Price to book value is the ratio between market capitalization and book value. When compared to the current market value per share, the book value per share can provide information on how a companys stock is valued. Book value per share formula how to calculate bvps. Using the pricetobook ratio to analyze stocks the motley fool. Calculating earnings per share gives investors an estimate of what the company should be worth. But, if you choose to calculate the ratio the second way i. The pricetobook pb ratio has been favored by value investors for decades and is widely used by market analysts.
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. May 22, 2019 book value per share compares the amount of stockholders equity to the number of shares outstanding. Book value per common share bvps definition investopedia. So youd think id be a big believer in the importance of book value. Thus, this measure is a possible indicator of the value of a companys stock. The formulas and examples for calculating book value per share with and without preferred stock are given below.
Should the company decide to dissolve, the book value per common share indicates the dollar value remaining for common shareholders after all assets are. The book value per share is the amount of the assets that will go to common equity in the event of liquidation. Bank of america corporation bac book value per share. Nov 06, 20 where book value per share equals shareholders equity divided by number of shares outstanding so one day, a company can have a pb of 1, meaning that bv and mv are equal. Find out all the key statistics for cabot corporation cbt, including valuation measures, fiscal year financial statistics, trading record, share statistics and more. But value investors tend to find book value a good starting point to investigating a company, especially if the pershare stock price crosses below that companys book value.
The number of dividends paid to stockholders versus the companys total net income. If the company shares are priced much higher than the book value per share, than the stock price might be too high for purchase. How to figure the book value of bank stock finance zacks. Book value per share compares the amount of stockholders equity to. During the past 3 years, the average book value per share growth rate was 45. Price to book value is a valuation ratio that is measured by stock price book value per share. What does benjamin grahams price to book value of the.
The book value per share is a market value ratio that weighs stockholders equity against shares outstanding. Therefore, it makes sense to use book value per share as a measure of the value of the company to the shareholders. Find the latest book value per share for amazoncom inc amzn. May 07, 2017 book value total assets total liabilities. Find the latest book value per share for bank of america corporation bac. Book value per share is the gaap number number of shares outstanding. Book value denotes the portion of the company held by the shareholders.
Should the company dissolve, the book value per common share indicates the dollar value remaining for common shareholders. Book value per share definition the book value per share is the value each share would be worth if the company were to be liquidated, all the bills paid, and the assets distributed. During the past years, the highest 3year average book value per share growth rate of total was 15. Book value is a useful tool for evaluating the market value per share. In other words, the value of all shares divided by the number of shares issued. Dividends that yield perpetual growth earnings perpetual growth rate in book value book value. Mostly, the book value is calculated for common stock only. Book value per share compares the amount of stockholders equity to the number of shares outstanding. Book value per share is a widely used stock evaluation measure. The pricetobook ratio, or pb ratio, is a financial ratio used to compare a companys book value to its current market price and is a key metric for value investors. Pricebook projected pricebook projected for a stock is the ratio of the companys most recent monthend share price to the companys estimated book value per share bps for the current fiscal. Priceearnings ratio is a good tool for comparing the value of competing companies. Jan 30, 2018 book value per share bvps is a measure of value of a companys common share based on book value of the shareholders equity of the company.
He is asked to calculate the book value per share of a stock and check if the stock trades at a fair value. Terminal value per share forthcoming dividends that yield perpetual growthr. B we used the average number of shares outstanding because the. Book value per common share or, simply book value per share bvps is a method to calculate the pershare value of a company based on common shareholders equity in the company. Strictly speaking, the higher the book value, the more the share is worth. Book value is the net asset value of the company according to standard accounting practice gaap, audited. If you buy a share at rs 100 and its book value is rs 120, then the share is considered a valuebuy. Book value per share basically tells us the worth of each share. Apr 18, 2018 definition of book value book value as the name suggests, is the value of the company as per its books i. The book value of a company is the total value of the companys. This compares a stocks book value to its market value.
Book value of an asset refers to the value of an asset when depreciation is accounted for. What remains is the equity that is distributable to its shareholders. Book value per share financial ratio the balance small business. Find the latest book value per share for alibaba group holding limited baba. Book value per share bvps is a measure of value of a companys common share based on book value of the shareholders equity of the company. Somewhat similar to earnings per share, book value per. To arrive at this number, subtract liabilities from assets. The book value per share bvps is calculated by taking the ratio of equity available.
However, value investors often consider stocks with a pb value under 3. Book value per share bvps total stockholders equity preferred equity number of shares of common stock outstanding step 1. This calculation is often modified to exclude intangible assets, because they are not readily convertible to cash, in which case the calculation is called the tangible book value per share. A tangible book value per share tbvps is a method of valuing a company on a per share basis by measuring its equity after removing any intangible assets. 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. Sep 27, 2016 the market value of a company is how much an acquirer would have to pay to buy all the shares of the company on the open market i. If the market value per share is lower than the book value per share, then the stock price may be undervalued. In other words, divide the applicable equity by the number of shares. Is it better to buy a company with a lower book value.
View book value per share for tot access over 100 stock metrics like beta, evebitda, pe10, free cash flow yield, kz index and cash conversion cycle. What is book value per share and how can it help you in investing. A shortterm event, such as a stock buyback, can skew periodending values. The company is not a dead company and it is growing. The book value per share is the value each share would be worth if the company were to be liquidated, all the bills paid, and the assets distributed. When the purchase price per share is less than book value per share, then the denominator of book value per share decreases by a greater percentage than does the numerator, and book value per share increases. If you want to compare companies, you can convert to book value per share, which is simply the book value divided by the number of outstanding shares. The secondlargest public sector bank has a welldiversified book with 32% exposure to overseas markets. Alibaba group holding limited baba book value per share. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. Stocks trading below their book value can give decent returns. The presence of preferred stock in the total stockholders equity, however, has a significant impact on the calculation.
If you buy a share at rs 100 and its book value is rs 120, then the share is considered a value buy. So higher book value means the shares have more liquidation value. The book value per preferred share is calculated by dividing the call price or par valueplus the cumulative dividends in arrears by the number of outstanding preferred shares. Peterkort and nielsen 2005 find an inverse relation between average stock returns and the book tomarket ratio in firms with a negative book value of equity i. The book value of equity per share is a financial measure which indicates a per share estimation of the minimum value of an entitys equity. Anyone using this measure should be aware of two issues, which are. Unlike other psu banks, the market share of the bank rose between 200607. Book value per share, quasireorganization flashcards. One way to look at book value per share is to consider what will happen if the company ceases all operations today. This interpretation is simplistic and deeper analysis is recommended. Book value per share stockholders equity minus preferred stock.
Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each share after all debts are paid accordingly. Book value per share equals total assets minus total liabilities divided by total outstanding shares. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the. This is a percentage of the current price of a share. Stocks trading below their book value can give decent. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the book value of its assets and pays liabilities at their book value.
Book value per share of common stock explanation, formula. Theoretically, the company can sell all its assets and pay off all its debt and liabilities. Book value per share financial definition of book value per share. The common share count used in the denominator is typically an average number of diluted common shares for the last year, which takes into. Its important to use the average number of outstanding shares in this calculation. It is the value that companys shareholders would receive after company liquidate all its assets and satisfy all its shortterm and longterm liabilities. Financial analysts usually compare the book value per share with its market price for fundamental analysis of shares. Ps can also be determined by dividing the price of a stock per share by pershare revenue. How do i interpret pricebook and book value per share on. Book value per share calculator for common stock finance. Depreciation is the reduction of an items value over time. The value per share is simply that value divided by the number of shares outstanding.
Book value is a key measure that investors use to gauge a stocks valuation. Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. If you choose to calculate the ratio the first way, the companys market capitalization is divided by the companys total book value from its balance sheet. Online finance calculator which helps to calculate the book value per share from the values of stack holders equity, preferred stock and total outstanding shares. It is calculated by the company as shareholders equity book value divided by the number of shares outstanding.
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