The Number of Outstanding Shares is the total number of shares issued by a company and held by its shareholders. This information is typically available in a company’s financial statements or can be obtained from financial news sources. Book value per share is often startup checklist a comprehensive list considered an indicator of a company’s financial health, while market value per share is more indicative of investor sentiment and expectations. Market value per share is determined by the current market price of a single share of the company’s common stock.
Book Value Per Share vs. Market Stock Price: What is the Difference?
Book value per share is the portion of a company’s equity that’s attributed to each share of common stock if the company gets liquidated. It’s a measure of what shareholders would theoretically get if they sold all of the assets of the company and paid off all of its liabilities. It is a financial metric that represents the value of a company’s equity per outstanding share. The book value per share formula is straightforward – it is the total equity of the company divided by the number of shares outstanding. This formula provides a clear picture of the per-share equity available to common shareholders.
Tangible Book Value Per Share (TBVPS): Definition and Formula
- Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.
- A key shortcoming of book value is that it ignores that the market value of many assets changes over time.
- Like other multiple-based approaches, the trend in price/BVPS can be assessed over time or compared to multiples of similar companies to assess relative value.
- In theory, BVPS is the sum that shareholders would receive in the event that the firm was liquidated, all of the tangible assets were sold and all of the liabilities were paid.
- This is why it’s so important to do a lot of research before making any investment decisions.
By multiplying the diluted share count of 1.4bn by the corresponding share price for the year, we can calculate the market capitalization for each year. They are not the same, as they focus on equity/assets and net income, respectively. Therefore, investors remain in the dark about the book value of an organisation in the in-between periods. The BVPS calculator simplifies the manual calculation process, saving time and reducing the chance of errors. Input the required values, and the calculator will provide the Book Value Per Share instantly. Book value per share plays a vital role in financial decision-making and provides valuable insights for investors and company management.
Relationship with Market price and Share count
It can be used in conjunction with other metrics like Discounted Cash Flow (DCF) and Price-to-earnings ratio (PE) to reach a somewhat concrete view of an organisation’s potential. The book value of an organisation is computed after netting the aggregate book value of all the assets against its intangible counterparts and liabilities. Investors and analysts use several measures to reach a fair valuation of a company to reckon whether that valuation https://www.bookkeeping-reviews.com/ is appropriately reflected in its share prices. Often multiple measures are employed for the purpose, and one of them is book value. The required information, including Total Shareholder Equity and Number of Outstanding Shares, can be found in a company’s financial statements, usually in the balance sheet and income statement. An increase in total assets typically leads to a higher book value per share, reflecting a stronger financial position.