Book value per share equals total assets minus total liabilities divided by total outstanding shares. From the above data, we can compute the earnings per share eps ratio as follows. Justified pricetobook multiple breaking down finance. Book value per share is a widely used stock evaluation measure. Carter mcbride started writing in 2007 with cmbas ip section. At its most basic level, the graham number starts with the book value per share and the earnings per share of a compan,y then multiplies by magic numbers. Its calculated by dividing the companys stock price per share by its book value per share bvps. Mostly, the book value is calculated for common stock only. In depth view into book value per share including historical data from 1997, charts, stats and industry comps.
Book value indicates the difference between the total assets and the total liabilities and when the formula for book value per share is to divide this book value by the number of common shares. 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. Book value per common share financial definition of book. Book value per share formula above assumes common stock only.
The justified pricetobook multiple or justified pb multiple is a pb ratio based on the companys fundamentals. In general, net asset value per share is the price an investor would receive when selling a funds shares back to the fund. During the past 12 months, s average book value per share growth rate was 40. Net asset value per share the expression of the value of a company or fund per share.
Book value per share represents equity of the firm on per share basis. Book value of equity per share bvps financial analysis. Financials of fundamental accounting chapter 10 11 terms. 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. In other words, this is the equity value of each common stock. Book value per share is broadly used in relative valuation and usually to compare a firms market value per share. At the same time, we use book value in the case of roe formula when we calculate the roe per share. Keep in mind that the book value per share will not be the same as the market value per share.
What remains is the equity that is distributable to its shareholders. During the past 5 years, the average book value per share growth rate was 41. Aug 17, 2019 the book value of assets and shares are the value of these items in a companys financial records. The formula for book value per share is to subtract preferred stock from stockholders equity, and divide by the average number of shares outstanding.
The formula for price to book value is the stock price per share divided by the book value per share. Earnings per share eps ratio measures how many dollars of net income have been earned by each share of common stock during a certain time period. Usually a companys book value and tangible book per share may not reflect its true value. This ratio is again one of the most important market value ratios to analyze and decide whether the price per share of the company is at its market price or not. It is the amount that shareholders would receive if the company dissolves, realizes cash equal to the.
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. 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. Book value per share is the gaap number number of shares outstanding. Recorded amount of equity applicable to common shares divided by the number of common shares outstanding.
If a firms bvps is higher than its market value per share, then the stock is undervalued, which means that it trades lower than the price that the market determines. The justified pb ratio is based on the gordon growth model. How to calculate the implied value per share of common. Fundamentals of financial accounting chapter 12 7 terms. The book value per common share is a financial ratio that calculates amount of equity applicable to each outstanding common stock. Market to book ratio price to book formula, examples. Should the company dissolve, the book value per common share indicates the dollar value remaining for common shareholders. In the case that the firm dissolves, it is the amount the shareholders will receive.
Book value per share calculator for common stock finance. 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. The market to book ratio is calculated by dividing the current closing price of the stock by the most current quarters book value per share. Book value of equity meaning, formula, calculation. This amount applies if a company disbands and liquidates its assets and uses the assets pay off liabilities, the remaining amount goes to the common shareholders.
Book value per share is the per share value of a company calculated based on the total equity of all the shareholders. This ratio is used to understand whether investing in it is worth the money or not. The assets may be carried on the balance sheets at the original cost minus depreciation. The book value per share is a market value ratio that weighs stockholders equity against shares outstanding. Calculate book value per share from the following stockholders equity section of a company.
The formulas and examples for calculating book value per share. 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. Should the company decide to dissolve, the book value per common share indicates the dollar value remaining for common shareholders after all assets are. How to calculate book value per share of common stock. In other words, the value of all shares divided by the number of shares issued. Book value per share of common stock explanation, formula. In this guide you learn what is book value, per share value and how to calculate it. 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. Book value per share formula how to calculate bvps. Net asset value per share is similar in concept to book value per share for other types of firms. Market value ratios calculation and formulas of market. May 22, 2019 book value per share compares the amount of stockholders equity to the number of shares outstanding. If there is preferred stock outstanding, in the book value per share calculation above,the numerator will need to be adjusted by the value of the preferred stock outstanding to get the stock holders equity attributable to the common stock holder. The market price per share of stockusually termed simply share price is the dollar amount that investors are willing to pay for one share of a companys 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. How do i interpret pricebook and book value per share on. In the case of a mutual fund, this is the per share prorated value of the securities underlying the fund. 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. One way to look at book value per share is to consider what will happen if the company ceases all operations today. Book value per share the ratio of stockholder equity to the average number of common shares.
Bv is considered to be the accounting value of each share, which may be drastically different than what the market is valuing the stock at. Nov 14, 2019 using the graham number for stock valuation. In the case of an exchangetraded fund, closedend fund, or stock, this is the expression of. It is calculated by the company as shareholders equity book value divided by the number of shares outstanding. Note its the number of common shares issued, not the dollar value. Book value per share is calculated by subtracting liabilities and the par value of any outstanding preferred stock from assets and dividing the remainder by the number of outstanding shares of stock. Book value is the net asset value of the company according to standard accounting practice gaap, audited. After such modification we get the following widely used formula to calculate book value per share. Book value of equity total assets total liabilities. Depreciation is the reduction of an items value over time. For the most part the book value bv really doesnt tell us a whole lot. Book value per share is usually used to compute the value or price per share of a companys stock during liquidation.
The graham number formula would suggest a pass on that stock. 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. Be sure to use the average number of shares, since the periodend amount may incorporate a recent stock buyback or issuance, which will skew the results. If company has issued common as well as preferred stock. Theoretically, the company can sell all its assets and pay off all its debt and liabilities. Industry average financial ratios average industry ratios. 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. 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. This means that for each common stock share you own. During the past 10 years, the average book value per share growth rate was 5.
The first part is to find out the equity available to the common stockholders. 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. These values can be found in the companys balance sheet and accounting tools such as journals and ledgers. Book value per share financial definition of book value per share. It is a popular measure of overall profitability of the company. It does not include warrants, preferred shares, retained earnings, or treasury stock. This means if the company dissolves, the shareholders will receive an amount per share as per book value per share. Book value per share bvps total stockholders equity preferred equity number of shares of common stock outstanding step 1. Find the latest book value per share for verizon communications inc.
Dec 01, 2019 book value per share formula above assumes common stock only. Book value of an asset refers to the value of an asset when depreciation is accounted for. For the purpose of analysis, the book value of equity is further divided by a total number of shares to make book value per share. Divide the available equity by the common shares outstanding to determine the book value per share of common stock. During the past 3 years, the average book value per share growth rate was 45. The price to 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. The expression of the value of a company or fund per share.
Some stockholders have keen interest in knowing the book value of the shares they own. This formula is also known as book value per common share or book value of equity per share. If the market value per share is lower than the book value per share, then the stock price may be undervalued. Book value per share financial definition of book value. Graham number calculator for stock valuation with automatic. Book value per share compares the amount of stockholders equity to the number of shares outstanding. 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 5 years, the average book value per share growth rate was 2. It is computed by dividing net income less preferred dividend by the number of shares of common stock outstanding during the period. The presence of preferred stock in the total stockholders equity, however, has a significant impact on the calculation. It uses the sustainable growth relation and the observation that expected earnings per share equal book value times the return on equity.
This video shows you how to calculate market share in excel and shows you how to identify when a brand or company will lose or gain market. 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. Book value per share bvps is a ratio used to compare a firms common shareholders equity to the number of shares outstanding. Book value per share of common stock is the amount of net assets that each share of common stock represents. 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. An assets book value is equal to its carrying value on the balance sheet, and companies.
May 29, 2019 you can also determine the book value per share by dividing the number of common shares outstanding into total stockholders equity. Investors and stock owners use book value per share of common stock to show how much money their shares are worth on the books after all debt is paid off. Book value per share stock holders equity preferred stock total outstanding shares. This may underestimate the true economic values of the assets. It has no specific relation to the value of the companys assets, such as book value per share does, which is based on the information from a companys balance sheet. Exxon mobils book value per share for the quarter that ended in dec. The above book value per share formula has two parts.
View book value per share for amzn access over 100 stock metrics like beta, evebitda, pe10, free cash flow yield, kz index and cash conversion cycle. Thus, this measure is a possible indicator of the value of a companys stock. The term book value is a companys assets minus its liabilities and is sometimes referred to as stockholders equity, owners equity, shareholders equity, or. 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. 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. Grahams number was suggested by benjamin graham to estimate the fundamental value of a stock. Book value of equity per share bvps is a ratio that divides common equity value by the number of common stock shares outstanding. Common stockholders equity determined on a per share basis.
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