Technicals Stability Returns
Book Value Per Share (BVPS) indicates the company's net asset value on a per share basis. Based on the net asset value, this is one of the most essential indications for determining the company's value. Book Value Per Share is calculated by subtracting total liabilities from total assets divided by total share outstanding.
The formula to derive BVPS
Total Shareholders' Equity - Shareholder's Equity or Shareholder's Fund is the amount of equity that belongs to the shareholder of the company. It is found in the Company's Balance Sheet.
Total Share Outstanding - The stock owned by a company's stockholders on the open market is referred to as shares outstanding. This comprises restricted shares held by a company's officials and institutional investors, in addition to individual shareholders. They are referred to as capital stock on a company's balance sheet.
Example of Book Value Per Share: For the financial year, GAIL (India) Ltd. reported Total Shareholder's Equity as Rs. 13170.34 Cr., and Total Share Outstanding as 392.98 Cr.
The value as per the formula (Total Shareholders Equity / Total Share Outstanding) is calculated as (83478.74 / 242326.87) = 65.55
In general, investors use the book value per share to analyze whether a share is appropriately valued.
The company's book value grows year over year, indicating that the company's existing assets are growing and the company is doing well.
A negative book value indicates that a company's total liabilities exceed its assets.
The book value per share (BVPS) metric is commonly used by investors to gauge whether the company's stock price is undervalued or overvalued compared to its market value per share.
Companies release balance sheets annually. As a result, there is no data between this era, and decisions based on historical numbers may lead to incorrect analysis.
Book value refers to how much an investor would receive if the company sold off its assets and paid off all its debts. Book value shows the actual value of the company. BVPS is calculated by taking the Book Value and dividing it by the total number of outstanding shares.
Book value shows the value of a company's assets. It computes using its financial statements. The value of the company's assets and obligations will be reflected in its financial statements, when liabilities are subtracted from assets, that value is company's book value.
In general, investors use the book value per share to analyze whether a share is appropriately valued. If the BVPS is less than the stock price, an investor might conclude that the stock is overvalued and it costs more than the assets it is entitled to. When the BVPS exceeds the stock price, an investor can basically purchase a portion of a company's assets for less than the assets are truly worth.
The company's book value grows year over year, indicating that the company's existing assets are growing and the company is doing well.
Because book value per share is only one of many stock selection metrics, it should never be utilised in isolation. Investors should not acquire a stock only because it is lower than its book value. Instead, they must conduct additional analysis on the company's current and past performance and future goals in order to determine its stock value.
For better analysis, always compare companies that operate in the same sector and also look at other financial metrics like Price to Book Ratio, Price to Earnings Ratio, EV to EBITDA Ratio, Peg Ratio, Current Ratio, etc.
A negative book value indicates that a company's total liabilities exceed its assets. In numerical terms, it owes more than it owns. However, just because a company has a negative book value does not inevitably make it a terrible investment or a corporation with a weak balance sheet.
In summary, there are two main reasons why assets may be under-represented: Only land assets are carried (recorded on the balance sheet) at cost. Brand names and other intangibles created in-house have no value. Because of accounting, both of these sorts of assets may make a company's balance sheet look considerably worse than it is.
