Book Value Per Share Greater Than Stock Price

In general traditional good companies are trading at 3 to 4 times of book value.

Book value per share greater than stock price. The following day the market price zooms higher and creates a p b ratio of greater than 1 meaning market value now exceeds book value. We first subtract the total liabilities from the total assets and divide the difference by the total number of shares outstanding on that date. High price to book ratio a price to book ratio that s greater than one means that the stock price is trading at a premium to the company s book value.

But for exceptionally good companies specially for debt free high growth companies like eicher motors stock is trading nearly 10 times of the book value. The market price per share is simply the current stock price that the company is being traded at on the open market. Book value networth nos of shares.

Book value is historical where as stock pricing is dynamic and determine by demand and supply and discounting principle bit confusing let me clear it assume a company which is listed in stock market and into business of real estate incorporated. The book value per share is a little more complicated. To an investor whether the p b ratio is 0 95 1 or 1 1 the.

Price to book ratio is used to compare a stock s market value to its book value and it is calculated by dividing the stock price by the book value per share. An important measure of value is the book value per share total assets minus intangible assets and liabilities divided by the number of outstanding shares. It is equal to the price per share divided by the book value per share.

Conversely a stock with a ratio greater than one can. For example a company has a p b of. A p b ratio of less than one means that the stock is trading at less than its book value or the stock is undervalued and therefore a good buy.

Unlike the pb. Dividing that 1 billion by the 100 million outstanding shares gives us a per share book value of 10. Networth share capital reserve surplus.