Book value per share is a company's common shareholders' equity divided by the number of shares outstanding. It shows the accounting, or net asset, value attributable to each share if the company's assets were sold at their balance-sheet value and all liabilities repaid. Investors compare it with the market price to gauge whether a stock trades above or below its accounting worth.
Worked example
A company has total shareholders' equity of $500 million and no preferred stock. It has 50 million shares outstanding. Book value per share = $500,000,000 ÷ 50,000,000 = $10.00 per share.
Why it matters
Book value per share is a benchmark for value investors, who often look for stocks trading near or below it as a sign of a possible margin of safety. The key pitfall is that book value is an accounting figure: it can understate intangible-heavy businesses like software firms and overstate companies whose assets are impaired but not yet written down. It is most useful for asset-intensive sectors such as banks and industrials.
Frequently asked questions
Book value per share comes from the balance sheet, while market value is the share price set by investors. The market price reflects expected future earnings and intangibles, so it is often higher than book value.
Yes. If a company's total liabilities exceed its assets, shareholders' equity is negative, and so is book value per share. This usually signals financial distress or large accumulated losses.