The Book Value Per Share (BVPS) Calculator is a financial tool used by investors, analysts, and business owners to determine the value of a company's equity on a per-share basis. Essentially, it measures the book value of a company—its total assets minus liabilities—and divides it by the number of outstanding common shares. This metric helps investors assess whether a company’s stock is overvalued or undervalued in relation to its actual net asset value.
BVPS is particularly useful when evaluating companies in industries with high asset bases, such as manufacturing, utilities, or financial services. It gives shareholders an idea of the value they would receive if the company were liquidated at its book value.
Formula of Book Value Per Share Calculator
To calculate the book value per share, use the following formula:
Book Value Per Share (BVPS) = (Total Shareholders' Equity (TSE) - Preferred Equity (PE)) ÷ Total Outstanding Shares (TOS)
Variables:
- BVPS: Book Value Per Share, the value of each common share based on the company’s equity.
- TSE: Total Shareholders' Equity, the total equity of the company, which is calculated as total assets minus total liabilities.
- PE: Preferred Equity, the value of preferred shares that must be deducted since BVPS applies only to common shareholders.
- TOS: Total Outstanding Shares, the number of common shares that are currently outstanding and held by investors.
Key Points:
- Total Shareholders' Equity (TSE) represents the net worth of the company based on accounting principles, including the total assets and liabilities.
- Preferred Equity (PE) is deducted because preferred shareholders have a higher claim on the company’s assets than common shareholders.
- Total Outstanding Shares (TOS) is the number of common shares available to the public, which can fluctuate with stock buybacks, issuance, or splits.
Common Terms and Reference Table
Here’s a table that breaks down common terms associated with book value per share and related concepts:
| Term | Definition |
|---|---|
| Total Shareholders' Equity (TSE) | The total value of a company's assets minus its liabilities. |
| Preferred Equity (PE) | The total value of preferred stock issued by the company. |
| Total Outstanding Shares (TOS) | The number of common shares currently available for trading and held by shareholders. |
| Market Value Per Share | The current trading price of a company’s stock in the open market. |
| Price-to-Book Ratio (P/B) | A valuation metric that compares the market value per share to the book value per share. |
This table provides essential terms that will help investors better understand the significance of the book value per share and its role in analyzing a company’s financial standing.
Example of Book Value Per Share Calculator
Let’s work through an example to demonstrate how the Book Value Per Share Calculator works.
Suppose a company has total shareholders' equity (TSE) of $500 million, preferred equity (PE) of $100 million, and 20 million outstanding common shares (TOS). Here’s how we would calculate the book value per share:
- Total Shareholders' Equity (TSE) = $500 million
- Preferred Equity (PE) = $100 million
- Total Outstanding Shares (TOS) = 20 million
Step 1: Calculate the Adjusted Equity for Common Shareholders
Total Equity for Common Shareholders = TSE - PE
Total Equity for Common Shareholders = $500 million - $100 million = $400 million
Step 2: Calculate the Book Value Per Share
Book Value Per Share (BVPS) = Total Equity for Common Shareholders ÷ Total Outstanding Shares (TOS)
BVPS = $400 million ÷ 20 million = $20
In this example, the book value per share is $20. This means that if the company were liquidated at its book value, each common shareholder would theoretically receive $20 per share.
Most Common FAQs
The book value per share is important because it provides a measure of the intrinsic value of a company's stock. Investors use it to determine whether the market price of a stock is overvalued or undervalued. A stock trading below its BVPS may be undervalued, whereas a stock trading significantly above its BVPS could be considered overvalued.
Book value per share is based on the company’s balance sheet (total assets minus liabilities), while market value per share is the price at which the stock is trading in the market. The two values can differ due to investor sentiment, growth potential, or market conditions, with market value often reflecting expectations about the company’s future performance.
Yes, BVPS can change over time due to several factors, including changes in total shareholders' equity, stock buybacks, stock issuance, or fluctuations in the number of outstanding shares. Companies can also experience changes in BVPS due to gains or losses in assets and liabilities.