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Book Value per Share Calculator
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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. The term “book value” is a company’s assets minus its liabilities and is sometimes referred to as stockholder’s equity, owner’s equity, shareholder’s equity, or simply equity.
Common stockholder’s equity, or owner’s equity, can be found on the balance sheet for the company. In the absense of preferred shares, the total stockholder’s equity is used.
Concept of Book Value per Share
Book value per share is just one of the methods for comparison in valuing of a company. Enterprise value, or firm value, market value, market capitalization, and other methods may be used in different circumstances or compared to one another for contrast. For example, enterprise value would look at the market value of the company’s equity plus its debt, whereas book value per share only looks at the equity on the balance sheet. Conceptually, book value per share is similar to net worth, meaning it is assets minus debt, and may be looked at as though what would occur if operations were to cease. One must consider that the balance sheet may not reflect with certain accuracy, what would actually occur if a company did sell all of their assets.
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Use of Book Value per Share
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. For example, a company that is currently trading for $20 but has a book value of $10 is selling at twice its equity. This example is referred to as price to book value (P/B), in which book value per share is used in the denominator. In contrast to book value, the market price reflects the future growth potential of the company.
Book value per share is also used in the return on equity formula, or ROE formula, when calculating on a per share basis. ROE is net income divided by stockholder’s equity. Net income on a per share basis is referred to as EPS, or earnings per share. As shown at the top of this page, book value per share is expressing stockholder’s equity on a per share basis.
Return to Top
- F
- Return on Equity (ROE)
- P/B Ratio
- Replacement Value per Share
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- Present Value
- Future Value
- Compound Interest
- Simple Interest
Watch more videos on the same topic : Price to Book Ratio Explained (P/B) | Finance In 5 Minutes!
Video Description
Price to book ratio, also known as PB ratio in the stock market, is explained simply in this 5 minute video! Price/book ratio is a valuation metric investors use to value a company based on the book value of that company’s assets!nnBook value is a measure of how much the company would be worth today, if they sold off all their assets and paid back all their liabilities. This only includes tangible assets, so it is not useful to use for companies that derive their value from intangible assets, such as technology companies!nnTo calculate the price to book ratio, the current share price is divided by the book value per share. Book value per share can be found by dividing the company’s book value by the number of shares outstanding in the business.nnPB ratio can sometimes reveal red flags in the underlying business. One of which may be when the PB ratio is less than one. This means that the stock is trading at less than the book value of the company, which could mean it’s undervalued, or that it is an over priced business.nnAnother red flag is if a company currently has a negative price to book ratio. This means the company is insolvent, and has more in liabilities than they do in assets!nThis video is part of my Stock Market Basics playlist.nn🔔 Subscribe for more videos! https://www.youtube.com/channel/UC_b9Qu9uX0Ky6YZWvwIY5-w?sub_confirmation=1 nn🕒 Time Stamps!n00:00 Intron00:22 Price to Book Ratio Explainedn01:15 PB Ratio Calculationn02:04 Examplen03:35 P/B Ratio Less Than 1n04:31 Negative P/B Ration05:00 Finding PB Ration05:30 Thanks for Watching!nn💻 Check out the Stock Market Basics Playlist for more videos like this!nn💬 Drop me a comment if you have a question!nn👍 Smash like for the YouTube algorithm!nn*Disclaimer*nThis channel is for entertainment purposes only and is not investment advice. All videos published on this channel are informational in nature and are not intended to give advice or recommendations about any particular security or investment. Before making any investment decisions, I would recommend you to speak to a financial professional that is qualified to provide advice.
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Book Value per Share Calculator
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