What is Book Value Per Share Formula (BVPS)?
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.
Explanation
The above book value per share formula has two parts.
The first part is to find out the equity available to the common stockholders. You may ask why we’re deducting the preferred stock and average outstanding common stock. We are deducting preferred stock from the shareholders’ equity because preferred shareholders are paid first after the debts are being paid off.
- Book Value = Shareholders Equity – Preferred Stock
- And Shareholder’s equity = Total Assets – Total Liabilities.
The second part is to divide the shareholders’ equity available to equity stockholders by the number of common shares.
In the below graph, we see the book value of Google for the past 10 years. The book value of Google in 2008 was $44.90 per share and has increased by 348% to $201.12 per share by the end of 2016.
Example
Let’s take a simple book value per share example –
UTC Company has the following information –
- Total assets at the end of the year – $150,000
- Total liabilities at the end of the year – $80,000
- Preferred Stock – $20,000
- Number of common shares – 2000 shares
Our job is to find out the book value of UTC Company.
The first part of our calculation would be to find out the total shareholders’ equity available to common shareholders and preferred stockholders.
To do that, we need to use the following formula.
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- Shareholders’ Equity = Total Assets – Total Liabilities;
- Or, Shareholders’ Equity = $150,000 – $80,000 = $70,000.
Now, we need to calculate how much shareholders’ equity is available to the common stockholders.
To do that, we need to deduct the preferred stocks from the shareholders’ equity.
- Shareholders’ equity available to common stockholders = Shareholders’ Equity – Preferred Stock
- Or, Shareholders’ equity available to common stockholders = $70,000 – $20,000 = $50,000.
Now, we need to divide the shareholders’ equity available to common stockholders by the number of common shares.
- Book Value per share formula of UTC Company = Shareholders’ equity available to common stockholders / Number of common shares
- BVPS = $50,000 / 2000 = $25 per share.
Uses of BVPS
Investors need to look at both the book value and market value of the share. If the investors can find out the book value of common stocks, she would be able to figure out whether the market value of the share is worth it.
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.
At the same time, we use book value in the case of ROE formula when we calculate the ROE per share.
If we look at the ROE per share formula, we would be able to understand it –
ROE per share = Net Income per Share / Book Value per Share
Here, net income per share is also called as EPS.
Book value Per Share Calculator
You can use the following Book value per Share Calculator
| Total Common Stockholders Equity | |
| Preferred Stock | |
| Number of Common Shares | |
| Book Value per Share Formula = | |
| Book Value per Share Formula = |
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Book Value Per Share in Excel (with excel template)
Let us now do the same Book value per share calculation above in Excel. Here you need to provide the four inputs of Total Assets, Total liabilities, Preferred Stock and Number of common shares
You can easily calculate the book value in the template provided.
To do that, we need to use the following formula.
Next, we need to calculate how much shareholders’ equity is available to the common stockholders.
To do that, we need to use the following formula.
Now, we need to divide the shareholders’ equity available to common stockholders by the number of common shares.
You can download this Book Value Per Share excel template here – Book Value per Share Excel Template.
Book Value Per Share Video (formula for book value per share)
Recommended Article
This article has been a guide to the Book Value Per Share formula. Here we discuss how to calculate BVPS step by step along with practical examples and excel templates. You may also have a look at these articles below to learn more about Financial Analysis –
