The price to book ratio pb ratio is a ratio used to compare a stock s market value to its book value. Book value per share is a widely used stock evaluation measure. If you want to compare companies, you can convert to book. Book value per share tells investors what a banks, or any stocks, book value is on a pershare basis. It is calculated by dividing the current closing price of. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.
Stock valuation with the benjamin graham formula old. Intrinsic value calculator based on warren buffetts book. The presence of preferred stock in the total stockholders equity, however, has a significant impact on the calculation. Using the pricetobook ratio to analyze stocks the motley fool.
Book value is calculated by taking a companys physical assets including land, buildings, computers, etc. 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. Book value per common share or, simply book value per share bvps is a method to calculate the pershare book value of a company based on common shareholders equity in the company. How to calculate the book value of a preferred stock. Book value per share bvps is the minimum cash value of a company and. Book value per share equals total assets minus total liabilities divided by total outstanding shares.
Book value per share is a fairly conservative way to measure a stocks value. To arrive at this number, subtract liabilities from assets. 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. The number of dividends paid to stockholders versus the companys total net income. Find the latest book value per share for berkshire hathaway inc brk. Book value and earnings come from the last annual financial report. The book value of a share of preferred stock is its call price plus any dividends in arrears. Book value is equal to a companys current market value divided by the book value of all of its shares. Understanding book value and market value is helpful in determining a stocks valuation and how the market views a companys growth. Net income on a per share basis is referred to as eps, or earnings per share. During the past 5 years, the average book value per share growth rate was 22. You can find these figures on the companys balance. Book value per share formula with calculator financial formulas.
Book value per common share bvps definition investopedia. Book value per share formula, calculator and example. 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. We can apply the values to our variables and calculate the book value per share. 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.
A shortterm event, such as a stock buyback, can skew periodending values. To arrive at the book value, simply subtract the depreciation to date from the cost. Book value per share formula how to calculate bvps. It is a good way to value companies which have significant assets. Intrinsic value based on warren buffetts book value model intrinsic value. If you look up any balance sheet you will find that it is divided in 3 sections. Book value per share is also used in the return on equity formula, or roe formula, when calculating on a per share basis. 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. 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. 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 second method i use to value a stock is with benjamin grahams formula from the intelligent investor in case youre not familiar with ben graham, hes widely recognized as the father of value. In order to properly assess the value of a common shareholders equity we must always remember to subtract the par value of the preferred stock.
To calculate the book value of a company, subtract the dollar value of the companys preferred stock from its shareholders equity. The book value of a company, stripped to basics, is the value of the company the stockholders will own if the. Mathematically, book value is calculated as the difference between a companys total assets and total liabilities. To incorporate new information, manually change the earning and book value fields.
The formula for calculating the book value per share of common stock is. The formula states that the numerator part is what the firm receives by the issuance of common equity and that figure increases or decreases depending upon the company is making profit or loss and then finally it decreases by issuing dividend and preference stock. Book value a companys total assets minus intangible assets and liabilities, such as debt. Book value formula how to calculate book value of a company.
Pricetobook ratio pb ratio definition investopedia. It is calculated by the company as shareholders equity book value divided by the number of shares outstanding. You can also determine the book value per share once you know the book value and shares outstanding. How to figure the book value of bank stock finance zacks. If the market value per share is lower than the book value per share, then the stock. A companys book value might be higher or lower than its market value. It is equal to the cost of the asset minus accumulated depreciation. What is book value per share and how can it help you in. Book value per share bvps overview, formula, example. The book value of a stock enters into some of the ratios that analysts use to determine whether a stocks current share price is undervalued or overvalued.
This compares a stock s book value to its market value. Book value per share financial ratio the balance small business. Book value is a key measure that investors use to gauge a stocks valuation. The book value per share bvps is calculated by taking the ratio of equity available to. Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation.
The formula for calculating book value per share is the total common stockholders equity less the preferred stock, divided by the number of. Net book value is the value at which a company carries an asset on its balance sheet. Book value per share stockholders equity total number of outstanding common stock. Mostly, the book value is calculated for common stock only. 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. This calculation is often modified to exclude intangible assets, because they are not readily convertible to cash, in which case the calculation. You can find these figures on the companys balance sheet. The book value calculation in practice is even simpler. Book value per share compares the amount of stockholders equity to the number of shares outstanding.
An assets book value is equal to its carrying value on the balance sheet, and companies calculate it netting the asset against its accumulated depreciation. Example l jenapharm was the most respected pharmaceutical manufacturer in east germany. 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. Please click growth rate calculation example gurufocus to see how gurufocus calculates. How to calculate the book value of a company sapling. The book value per preferred share is a financial ratio that calculates amount of equity applicable to each outstanding preferred stock. Warren buffett shares a lot of this investment thoughts in the berkshire hathaway reports and homepage. Book value per share calculator for common stock finance. Find the latest book value per share for facebook inc fb. Ps can also be determined by dividing the price of a stock per share by pershare revenue. Book value per common share or, simply book value per share bvps is a method to calculate the pershare book value of a company based. Its important to use the average number of outstanding shares in this calculation.
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