Ratio Analysis
Book Value Per Share
= |
Stockholders Equity
- Preferred Stock |
|
Average Outstanding
Shares |
Somewhat similar to
earnings per share, book value per share relates the stockholder's
equity to the number of shares outstanding, giving the
shares a raw value.
| Things to remember |
- Comparing the market value to
the book value can indicate whether or not the stock
in overvalued or undervalued.
- During bull markets the stock
price is more likely to trade significantly higher
than book value, and in a bear market the two values
will be closer to equal.
|
[Click
on the button above to see the financial statement] |
| For Cory's Tequila Co. |
| $11,678 - $0 |
= $3.57 |
| 3271 |
Book Value Analysis:
For the most part the book value (BV) really doesn't tell us a whole
lot. Cory's Tequila Co. is trading at over $100 and the BV is
only $3.57. BV is considered to be
the accounting value of each share, which may be drastically different than
what the market is valuing the stock at. And the truth is that
market and book values have nothing in common. Market value is
what the investment community's expectations are and book value
is based on costs and retained earnings. One situation where
BV can be useful is if the market value is trading below the
book value, this rarely happens, but if it does it could mean
that the company is undervalued and might be an attractive buy.
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