Book Value per Share

Book value per share estimates how much of the company’s accounting equity is attributable to each common share after removing any claim belonging to preferred shareholders. It is based on the balance-sheet residual: assets minus liabilities gives total equity, and subtracting preferred equity isolates the portion available to common shareholders. Dividing that amount by the number of common shares outstanding gives a per-share book value, which is useful as a balance-sheet benchmark rather than a market price.

Use this when comparing a stock’s market price to the accounting value of the business, especially in valuation work for banks, insurers, and asset-heavy companies. It is also useful when analyzing whether common equity is thin or well-supported after accounting for preferred stock.

• Using total shares outstanding instead of common shares outstanding
• Subtracting preferred stock only if it is classified as debt rather than equity
• Treating book value per share as the same thing as market value per share