Book Value Per Share Higher Is Better

Every quarter a company declares the result and from that you can find the book value.

Book value per share higher is better. Book value assets liabilities. How book value per share works. 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.

The share price can be higher or lower then its book value. It is calculated by multiplying the market price per share of the company with the number of outstanding shares. It can vary and at any point in time it can be more or less than book value.

The book value per share is the amount of the assets that will go to common equity in the event of liquidation. To an investor whether the p b ratio is 0 95 1 or 1 1 the. Generally the book value per share is used by investors especially value investors to determine whether a share is fairly valued.

Book value per common share bvps calculates the common stock per share book value of a firm. The book value is simply the company s assets minus its liabilities. 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.

So higher book value means the shares have more liquidation value. Put another way book value per share rates the total shareholder s equity of a. When book value per share is high compared to a company s share price the company s stock is deemed as undervalued.

The price to book ratio measures a company s market price in relation to. Strictly speaking the higher the book value the more the share is worth. Introduction the price to book p b ratio is used to compare a company s market price to book value and is calculated by dividing price per share by book value per share.