BAJAJ BROKING
February 12, 2025
6 mins read
The stock market is chockful of metrics that help investors make informed investment decisions. One of these metrics is the Book Value Per Share or BVPS. With the help of this tool, investors can gain access to a company's net asset value per share, i.e. how much each share is worth if the company decides to pay off all its debts and sell all of its assets.
The book value per share of a company can be calculated by taking its total equity and dividing it by its outstanding shares. This will help investors analyze whether the company’s stock is undervalued or overvalued when compared to its current market price. BVPS is particularly helpful in gauging the asset value of companies working in sectors with a lot of physical assets.
There are a few reasons why we use BVPS. One of the main reasons is for investors to help compare a company's equity value to its market value, i.e. the price of its shares. Such a comparison is also known as the Price-to-Book (P/B) ratio. Here, the book value is indicative of the company’s current equity and the market price is indicative of its future growth potential.
Another use the BVPS can be put to is for calculating Return on Equity (ROE) on a per-share basis. ROE is calculated by dividing the company’s net income by the shareholders' equity.
Other than this, BVPS is also used to interpret metrics like Earnings Per Share (EPS), which helps measure the net income of the company per its outstanding share.
Additional Read: What is Price-to-Book Value Ratio
When investors want to find out a company’s value per share with the equity that common shareholders have access to, it can only be done using the book value per share formula. Some other names for BVPS are. It's also known as stockholder's equity, owner's equity, shareholder's equity, or just equity.
Here is the formula for calculating the BVPS for a company:
Book Value Per Share = Total Common Stockholder Equity / Number of Common Shares
There are three key components that investors need to know to calculate the book value per share accurately.
Shareholders' Equity: This indicates the company’s net worth which is the value left after subtracting liabilities from the company’s total assets. This is also known as the company’s book value.
Preferred Equity (if applicable): Equity owned by preferred shareholders who are prioritized over common shareholders in terms of dividends and assets. Usually, when calculating BVPS preferred equity is usually excluded since the value available to common shareholders is considered more important.
Total Outstanding Shares: As the name suggests, this includes all the shares that investors hold whether restricted or publicly traded. Details about the total outstanding shares can be found in the company’s annual report.
To help you better understand how the BVPS metric works, here’s a small example:
Suppose Company A has a common equity balance of ₹20 Crores. Here their outstanding shares are 2 crores. The BVPS in this case would be ₹10 (₹20 crore ÷ 2 crore shares). As the company’s earnings increase, so will its BVPS. However, this is possible when the company reinvests the increased earnings into new assets or into paying down liabilities.
In short, BVPS is the amount that shareholders will get if the company’s shares are liquidated and all of its physical assets are sold after clearing all obligations. Investors, however, use BVPS to analyze if the stock price of a company is overvalued or undervalued keeping the current market value per share of the company in mind. In cases where the company’s BVSP is higher than the current market value per share, stocks become cheaper.
Particular ways are using which the BVPS can be increased. One of these involves using a part of the company's profits to purchase assets to increase the value of the common equity and BVPS together. As an alternative way, the company can also use the profits to pay off its debt which will end up increasing the value of both its common equity and the BVPS.
If all this does not seem possible, then the company can also look into repurchasing common stock from existing owners by utilizing the profit it generates.
The market value per share or MVPS can be classified as a company’s potential to make money in the future. The book value per share or BVPS on the other hand is more about focusing on past expenses. This is why, an increase in the market value per share of a company is indicative of a company having the potential to make more profits.
So, to make it simpler, the market value per share or MVPS is the price of a single stock of the company being traded publicly, divided by the total number of outstanding shares. MVPS is driven by the market’s supply and demand and keeps changing unlike BVPS, which is fixed.
There is no denying the BVSP is a useful metric. However, investors need to remember that it is not perfect. Investors should know its limitations as well before putting it to use.
For a company with several intangible assets like patents, trademarks, etc, the BVPS might not be accurate as these assets are often undervalued.
BVPS does not take into account the current market position or the company’s potential for future growth which can have a greater impact on its value.
Since the accounting process can vary from one company to another, which in turn has a crucial effect on how the book value is calculated, comparing to companies might not be ideal.
In industries where intangible assets play a larger role, like in the tech industry, the BVPS has less meaning compared to industries like manufacturing etc.
BVSP or book value per share is an important factor in helping determine what the company's intrinsic share value is while considering its net assets. This helps traders and investors discover which stocks are undervalued but are backed by strong fundamentals, thus helping them make better investment decisions. However, it is important to consider the limitations that BVSP holds before making it a sole metric to make investment decisions.
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Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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Share this article: 
Book Value Per Share is a metric that helps investors analyze whether a company’s stock is undervalued or overvalued when compared to its current market price. BVPS is particularly helpful in gauging the asset value of companies working in sectors with a lot of physical assets
The book value per share of a company can be calculated by taking its total equity and dividing it by its outstanding shares.
One of the main reasons is for investors to help compare a company's equity value to its market value, i.e. the price of its shares. It is also used for calculating Return on Equity (ROE) on a per-share basis. ROE is calculated by dividing the company’s net income by the shareholders' equity. Other than this, BVPS is also used to interpret metrics like Earnings Per Share (EPS), which helps measure the net income of the company per its outstanding share.
When the BVPS of a company is high, it indicates that the stocks of the company are undervalued and hold the potential to produce profits.
The market value per share or MVPS can be classified as a company’s potential to make money in the future. The book value per share or BVPS on the other hand is more about focusing on past expenses.
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