Book Value Per Share Ratio Meaning

The information needed to calculate bvps is found on a company s balance sheet.

Book value per share ratio meaning. Book value per share is a fairly conservative way to measure a stock s value. When compared to the current market value per share the book value per share can provide information on how a company s stock is valued. Book value per share is a ratio that compares the net asset value of a company minus preferred equity to the total number of common shares available on the market.

In the case that the firm dissolves it is the amount the shareholders will receive. The market value per share is a forward looking measure of what the investment community believes a company s shares are worth. For example if the bvps is 20 per share and the market value of the same common share is 30 per share the investor can find out the ratio of price to book value as price book value 30 20 1 5.

Book value per share bvps is a ratio used to compare a firm s common shareholder s equity to the number of shares outstanding. 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. Companies use the price to book ratio p b ratio to compare a firm s market capitalization to its book value.

What does book value per share mean. 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. Many investors rephrase this equation to form the book to market ratio formula by dividing the total book value of the firm by the total market value of the company.

The two measures are based upon different information. Consequently it is dangerous to compare the two measures. We first subtract the total liabilities from the total assets and divide the difference by the total number of shares outstanding on that date.

What is the book value per share bvps. Comparing bvps to a stock s market price could help value investors find opportunities. It s calculated by dividing the company s stock price per share by its book value per.