Book Value Per Share Vs Stock Price

The key differences.

Book value per share vs stock price. 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. A stock s trading price represents the number that an arm s length willing seller and willing buyer find agreeable to each party. If there are 10 million shares outstanding each share would represent 2 50 of book value.

The price to book p b ratio is a popular way to compare market value and book value. The basics of the p b ratio the p b ratio compares a company s market capitalization or market value to its book value. The price to book ratio formula is calculated by dividing the market price per share by book value per share.

The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding. If the value of bvps exceeds the market value per share the. Though the market value can be calculated at any point in time an investor gets to know the book value when a company files it s earning on a quarterly basis.

Market value is the value of a stock or a bond based on the traded prices in the financial markets. The stock market assigns to. Finally we divide the current share price of 15 by that 10 to reach a price to book.

The book value of a company stripped to basics is the value of the company the stockholders will own if the firm s. The book value per share is a little more complicated. Specifically it compares the company s stock price to its book value per.

If the share price is 5 then the p b ratio would be 2x 5 2 50. Market price of 100 per share and has 5 million shares outstanding xyz s market value would be 500 million. Book value is the value of the company according to its balance sheet.