Book Value Per Share Formula

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.

Book Value per Share = (Total Common Stockholders Equity – Preferred Stock) / Number of Common Shares

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For eg:
Source: Book Value Per Share Formula (wallstreetmojo.com)

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 EquityShareholders Equity Shareholder’s equity is the residual interest of the shareholders in the company and is calculated as the difference between Assets and Liabilities. The Shareholders' Equity Statement on the balance sheet details the change in the value of shareholder's equity from the beginning to the end of an accounting period.read more – 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.

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 valueBook Value And Market Value Book value is the net asset value of the company and is calculated as the sum of total assets minus the amount of intangible assets and is always equal to the carrying value of assets on the balance sheet, whereas market value is the value of the assets that we would receive if we sold them today.read more 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 valueRatio Of Price To Book Value Price to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share read more 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 EPSEPS Earnings Per Share (EPS) is a key financial metric that investors use to assess a company's performance and profitability before investing. It is calculated by dividing total earnings or total net income by the total number of outstanding shares. The higher the earnings per share (EPS), the more profitable the company is.read more.

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 =

Total Common Stockholders Equity − Preferred Stock
	=
Number of Common Shares

0-0
	=	0
0

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.