Financial metric · Per share and valuation
Book Value per Share (BVPS)
Shareholders' equity divided by shares outstanding: the accounting value of each share. It is the basis of the price-to-book ratio.
How to calculate it
Book value per share = common shareholders' equity ÷ shares outstanding at period endTangible book value per share = (common equity − goodwill − other intangible assets) ÷ shares outstandingHow to read it
- Steady growth in book value per share over many years shows a company retaining and compounding profits. Warren Buffett long reported Berkshire Hathaway's book value per share growth for this reason.
- A share price below book value per share is not automatically cheap. The market may doubt that the assets can earn a decent return, or that their book values are real.
Common pitfalls
- Book value is an accounting number. It can include goodwill and inflated receivables or inventory, and can understate assets carried at old historical cost, such as land bought decades ago.
- Buybacks at prices above book value reduce book value per share, and many large U.S. companies have shrunk their equity this way, some to below zero. Book value tells you little about them.
- Preferred stock must be removed from equity to get the common shareholders' portion.
Where to find it in a 10-K
Balance sheet: total stockholders' equity, preferred stock, goodwill and intangibles; cover page or equity note for shares outstanding. Banks typically report book value and tangible book value per share in earnings releases.
U.S. vs. China reporting
Book value carries more weight in China, where many banks, insurers and state-owned companies trade near or below book and regulators have encouraged companies trading below book to boost shareholder returns. In the U.S., heavy buybacks and large intangible assets make book value less useful outside financials and asset-heavy industries.