The priceto book, or pb ratio, is calculated by dividing a companys stock price by its book value per share, which is defined as its total assets minus any liabilities. During the past 3 years, the average book value per share growth rate was 17. Is it better to buy a company with a lower book value. Book value per share bvps takes the ratio of a firms common equity divided by its number of shares outstanding. Book value is not the same thing as market value or fair value. Pe ratio is one of the most widely used tools for stock sele. Feb 04, 2019 book value per share is a reliable barometer of a stocks potential value. Net asset value per share the expression of the value of a company or fund per share. The price to book or pricebook value ratio helps investors to compare the market value, or the price they are normally paying per share, to the traditional measure of the firms value. Another per share amount that analysts frequently calculate is the book value per share. The book value per share is the minimum cash value of a company and its equity for common shareholders. Ps ratio an rationale for the ps ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as eps or book value.
May 22, 2019 if book value per share is calculated with just common stock in the denominator, then it results in a measure of the amount that a common shareholder would receive upon liquidation of the company. 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. If the value of bvps exceeds the market value per share. Book value per share calculator for common stock finance. Book value per share, quasireorganization flashcards. Book value per share bs is can be calculated by subtracting liabilities from assets, and then dividing it by the total number of currently outstanding shares. If book value per share is calculated with just common stock in the denominator, then it. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation and not necessarily market valuation. Book value is generally calculated on per share basis known as book value per share. If the pe ratio of a companys common stock were 12, and its earnings were 2. The term book value is a companys assets minus its liabilities and is sometimes referred to as stockholders equity, owners equity, shareholders equity, or simply equity. In other words, this is the equity value of each common stock.
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 companys assets minus its liabilities and is sometimes referred to as stockholders equity, owners equity, shareholders equity, or. Book value of an asset refers to the value of an asset when depreciation is accounted for. Should the company decide to dissolve, the book value per common share indicates the dollar value remaining for common shareholders after all assets are.
Book value per share formula with calculator financial formulas. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the. Keep in mind that the book value per share will not be the same as the market value per share. Book value per share compares the amount of stockholders equity to the number of shares outstanding. Book value per share bvps is financial measure that represents a per share assessment of companys shareholders equity. During the past 12 months, samsung electronics cos average book value per share growth rate was 20. If the market value of a share of common stock is 2. In other words, the value of all shares divided by the number of shares issued. Depreciation is the reduction of an items value over time. The book value per share is a market value ratio that weighs stockholders equity against shares outstanding. When compared to the current market value per share, the book value per share can provide information on how a companys stock is valued. The ratio of price and book value per share gives us one of the most utilised financial ratio related to stock investing.
Comparing the stock price to the book value per share is done using the pb ratio, or price to book ratio. During the past 12 months, general motors cos average book value per share growth rate was 7. Book value per share equity ratio analysis intermediate. 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. So higher book value means the shares have more liquidation value. We better know it as pb ratio price to book value ratio. Our job is to find out the book value of utc company. Book value per common share financial definition of book. Book value per share shareholders equity preferred equity total outstanding common shares for a more realworld example of book value per share in action, lets turn to accountingtools. At the same time, we use book value in the case of roe formula when we calculate the roe per share. Book value per share is usually used to compute the value or price per share of a companys stock during liquidation. The first part of our calculation would be to find out the total shareholders equity available to common. After such modification we get the following widely used formula to calculate book value per share. Apr 18, 2018 definition and calculation of book value per share.
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. Pricetobook ratio pb ratio definition investopedia. Book value per share can separate the wheat from the chaff on a stock. 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. The book value per share is the amount of the assets that will go to common equity in the event of liquidation. During the past 5 years, the average book value per share growth rate was 14. General motors cos book value per share for the quarter that ended in dec. The formula for book value per share is to subtract preferred stock from stockholders equity, and divide by the average number of shares outstanding. Earnings per share serves as an indicator of a companys profitability. During the past 5 years, the average book value per share growth rate was 4. Book value per share formula how to calculate bvps. The formula for book value per share requires three. What is book value per share and how can it help you in investing. Calculate book value per share from the following stockholders equity section of a company.
While its critical to understand the definition and calculation of book value per share. Book value per share bvps is a ratio used to compare a firms common shareholders equity to the number of shares outstanding. Book value is based on reported amounts within the balance sheet. Book value per share is a reliable barometer of a stocks potential value. Book value per share financial definition of book value per share. It is very crucial to understand how preferred shares and common stock are. Book value per share is a widely used stock evaluation measure.
The book value per common share is a financial ratio that calculates amount of equity applicable to each outstanding common stock. If company has issued common as well as preferred stock. In the case that the firm dissolves, it is the amount the shareholders will receive. In these cases, the stock can be priced way above the book value per share of the company.
Book value per share formula, calculator and example. Pricesales ttm price book mrq enterprise value revenue 3. Find the latest book value per share for amazoncom inc amzn. Equity preferred equity total outstanding common shares. 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. Compute the book value per common share for both 20x1 and 20x2 for the crosby corporation. The price to book ratio pb ratio is a ratio used to compare a stocks market value to its book value. Book value per share financial definition of book value. Strictly speaking, the higher the book value, the more the share is worth. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. Book value per common share bvps derives a companys book value on a. Book value per share is a market value ratio used for accounting purposes by. During the past 3 years, the average book value per share growth rate was 0.
If the market value per share is lower than the book value per share, then the stock price may be undervalued. Find the latest book value per share for the home depot inc hd. Book value per common share bvps definition investopedia. Find out all the key statistics for ford motor company f, including valuation measures, fiscal year financial statistics, trading record, share statistics and more. Earnings per share eps is the portion of a companys profit allocated to each outstanding share of common stock. Pricesales ttm pricebook mrq enterprise valuerevenue 3. Thus, this measure is a possible indicator of the value of a companys stock. What is book value per share and how can it help you in. Samsung electronics cos book value per share for the quarter that ended in dec. The price to book ratio formula, sometimes referred to as the market to book ratio, is used to compare a companys net assets available to common shareholders relative to the sale price of its 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 individual share after all debts are paid accordingly. Book value per share financial ratio the balance small business. Aug 17, 2019 the book value per share is a market value ratio that weighs stockholders equity against shares outstanding. The formula for price to book value is the stock price per share divided by the book value per share. Book value of equity per share bvps is a ratio that divides common equity value by the number of common stock shares outstanding. It indicates the level of safety associated with each common share after removing the effects of liabilities. Book value per share of common stock formula, example. Using the pricetobook ratio to analyze stocks the motley fool. It is calculated by dividing the current closing price of. Genm book value per share analysis book value per share bs is can be calculated by subtracting liabilities from assets, and then dividing it by the total number of currently outstanding shares. 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. 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. If the market value of a share of common stock is 3.
Book value per share can separate the wheat from the chaff on a stock but it needs to be applied correctly. 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 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. This refers to the amount of reported stockholders equity for each share of common stock. Book value per share of common stock explanation, formula.
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