Book value per share
Definition
The book value of a company divided by the number of shares
outstanding.
Book value
Definition 1
A company's common stock
equity as it appears on a balance sheet, equal to total assets minus
liabilities, preferred stock, and intangible assets such as goodwill.
This is how much the company would have left over in assets if it went out of
business immediately. Since companies are usually expected to grow and generate
more profits in the future, market capitalization is higher than book value for
most companies. Since book value is a more accurate measure of valuation for
companies which aren't growing quickly, book value is of more interest to value
investors than growth investors.
Definition 2
The value of an asset as it appears on a balance sheet, equal to cost minus
accumulated depreciation.
From Ken
Little,
Investors looking for hot stocks aren’t the only ones
trolling the markets. A quiet group of folks called value investors go about
their business looking for companies that the market has passed by.
Some of these investors become quite wealthy finding sleepers, holding
on to them for the long term as the companies go about their business without
much attention from the market, until one day they pop up on the screen, and
some analyst “discovers” them and bids up the stock. Meanwhile, the value
investor pockets a hefty profit.
Value investors look for some other indicators besides earnings
growth and so on. One of the metrics they look for is the Price to Book ratio
or P/B. This measurement looks at the value the market places on the book value
of the company.
You calculate the P/B by taking the current price per share and
dividing by the book value per share.
P/B = Share Price / Book Value Per Share
Like the
P/E, the lower the P/B, the better the value. Value investors would use a low
P/B is stock screens, for instance, to identify potential candidates.