Question 1

What is book value per share (BVPS)?

Accepted Answer

Book value per share is the net asset value of a company on a per-share basis. It equals total shareholders' equity minus any preferred equity, divided by shares outstanding. If a company were to liquidate all assets and pay off all liabilities, BVPS represents what common shareholders would theoretically receive per share. It is the accounting value of equity — not the market price.

Question 2

How is book value per share calculated?

Accepted Answer

BVPS = (Total Shareholders' Equity − Preferred Equity) ÷ Shares Outstanding. For example, if a company has $10 billion in equity, $1 billion in preferred equity, and 2 billion shares outstanding, the BVPS is ($10B − $1B) ÷ 2B = $4.50 per share.

Question 3

What is a good price-to-book (P/B) ratio?

Accepted Answer

A P/B below 1.0 means the stock trades below its net asset value — historically considered attractive, especially for banks and asset-heavy industrials. For technology and consumer companies with large intangible assets, P/B ratios of 4–10× are common because brand value and IP do not appear on the balance sheet. Always compare P/B within the same sector.

Question 4

What is the Graham Number and how does it use BVPS?

Accepted Answer

The Graham Number is a valuation formula from Benjamin Graham: √(22.5 × EPS × BVPS). It estimates the maximum price a defensive investor should pay for a stock. The 22.5 multiplier comes from Graham's rule that P/E × P/B should not exceed 22.5 (15 × 1.5). Stocks trading well below their Graham Number may correspond to potential undervaluation on Graham's criteria.

Question 5

What are the limitations of book value per share?

Accepted Answer

BVPS reflects historical cost accounting — it understates assets that have appreciated and ignores intangibles like brand, software, and customer relationships. For technology companies, book value can be nearly meaningless. It is most useful for banks, insurers, real estate, and capital-heavy industrials where balance sheet values are close to market values. It should always be paired with earnings-based metrics like P/E, DCF, and EV/EBITDA.

Question 6

How does Equity Rank use book value in its valuations?

Accepted Answer

Equity Rank's consensus valuation blends 8–15 methods per stock, including Price-to-Book, the Graham Number, and sector-adjusted multiples. For asset-heavy sectors (financials, utilities, industrials), P/B receives a higher weight in the consensus. For technology and growth companies, earnings-based methods like DCF and PEG receive more weight. The result is a sector-calibrated fair value estimate.

Sector	Typical P/B (est.)	Context
Technology	6–10×	High intangibles; book understates real value
Consumer Discretionary	4–7×	Brand equity not on balance sheet
Health Care / Biotech	4–8×	R&D pipeline and IP skew P/B
Communication Services	3–5×	Subscriber value exceeds book assets
Industrials	2–4×	Tangible assets; P/B more meaningful
S&P 500 Average	4–5×	Broad market benchmark (2024 est.)
Consumer Staples	4–6×	Brands inflate premium vs book
Financials (Banks)	1–2×	Most asset-heavy; P/B most useful here
Energy	1.5–2.5×	Commodity cycles compress P/B
Utilities	1.5–2.5×	Regulated assets; predictable P/B range
Materials	1.5–3×	Commodity and capital-intensive
Real Estate (REITs)	1–2×	NAV is more relevant than BVPS

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Frequently asked questions

Book Value Per Share Calculator

Sector P/B benchmarks

Go deeper: multi-method valuation

800+ stocks re-scored every week. Delivered free every Sunday.

Frequently asked questions

800+ stocks re-scored every week.
Delivered free every Sunday.