Metric Explainer: Book Value Per Share
The accounting value of the company per share — what each share is "worth" on the balance sheet. "Book Value matlab company ki kitaabi value — saari property...
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Simple definition
The accounting value of the company per share — what each share is "worth" on the balance sheet.
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"Book Value matlab company ki kitaabi value — saari property, cash, investments minus saara karzaa. BVPS = yeh per share kitna hai."
Why it matters
- PB ratio denominator — needed to calculate Price-to-Book valuation
- Minimum value benchmark — in theory, BVPS is What you'd get if the company liquidated
- Wealth creation check — growing BVPS means the company is accumulating value
- Especially relevant for banks — PB ratio is the primary valuation metric for banks
Formula
BVPS = Total Shareholders' Equity / Number of Shares Outstanding
Where Shareholders' Equity = Share Capital + Reserves & Surplus
How to read it
| Scenario | Interpretation |
|---|---|
| BVPS growing 10%+ annually | Company is retaining and reinvesting profitably |
| BVPS flat or declining | Losses eroding equity, or excessive dividend payout |
| Market Price > BVPS (PB > 1) | Market values intangibles, future earnings, brand |
| Market Price < BVPS (PB < 1) | Market thinks assets are overstated or business is declining |
Sector context
| Sector | BVPS relevance | Why |
|---|---|---|
| Banking | Very high | Tangible book value = best valuation anchor |
| Manufacturing | High | Physical assets are real and measurable |
| IT Services | Low | Value comes from people/IP, not balance sheet assets |
| FMCG | Low | Brand value >> book value |
Common mistakes
Mistakes to avoid
- Book value ≠ market value of assets — Land bought 20 years ago is on books at historical cost, not current market value
- Goodwill inflates book value — Overpriced acquisitions add goodwill that may be written off later
- Comparing BVPS across companies — ₹500 BVPS and ₹50 BVPS mean nothing without context of share count and sector
- Ignoring intangible value — IT companies' real value (people, contracts, IP) is not on the balance sheet
Real example
| Company | BVPS | Market Price | PB | Why |
|---|---|---|---|---|
| SBI | ₹380 | ₹750 | 2.0 | Tangible assets well-valued |
| Infosys | ₹200 | ₹1,800 | 9.0 | Intellectual capital >> book value |
| Vedanta | ₹150 | ₹450 | 3.0 | Mineral reserves not fully on books |
Red flags
- BVPS declining over time — losses eating into reserves
- BVPS inflated by large goodwill — check acquisition track record
- Negative BVPS — liabilities exceed assets; seriously distressed company
Related metrics
- PB Ratio — Price / Book Value
- ROE — Return generated on book equity
- Shareholders' Equity — Total equity before dividing by shares