Book Value Per Common Share

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Book Value Per Common Share (BVPS)

What it is

Book value per common share (BVPS) measures the per-share accounting value of a company’s equity available to common shareholders. It represents the residual dollar amount that would theoretically remain for common shareholders if a company liquidated its assets and paid its creditors and preferred shareholders.

Formula

BVPS = (Total Shareholders’ Equity − Preferred Equity) ÷ Total Outstanding Common Shares

Notes:
* Total Shareholders’ Equity is the equity reported on the balance sheet.
* Preferred Equity is subtracted because preferred holders have priority over common shareholders.
* Total Outstanding Common Shares is typically the diluted share count (includes potential shares from options, warrants, convertibles).

What BVPS tells you

  • BVPS is an accounting-based, historical measure of per-share equity.
  • If BVPS is greater than the market price per share, the stock may appear undervalued on a book-value basis.
  • Corporate actions affect BVPS:
  • Earnings (retained) increase shareholders’ equity and can raise BVPS.
  • Dividends reduce equity and can lower BVPS.
  • Share repurchases reduce both equity (cash outflow) and outstanding shares; the net effect on BVPS depends on the repurchase price relative to the current BVPS.

Example

If a company has $10,000,000 in common shareholders’ equity and 1,000,000 common shares outstanding:
BVPS = $10,000,000 ÷ 1,000,000 = $10.00 per share.

If the company earns $500,000 and retains it, common equity increases and BVPS generally rises; using earnings to buy assets or reduce liabilities both increase common equity.

Market Value per Share vs. Book Value per Share

  • Book value is based on historical accounting entries; market value reflects what investors are willing to pay and is forward-looking.
  • Market price incorporates expected future earnings, growth prospects, intangibles (brand, patents, human capital) and risk — items that may not appear on the balance sheet.
  • Accounting rules (e.g., immediate expensing of marketing under GAAP) can lower book value even when investments create valuable intangible assets, producing divergence between market and book values.

BVPS vs. Net Asset Value (NAV)

  • BVPS applies to corporations and measures residual equity per common share.
  • NAV applies to funds (mutual funds, ETFs) and equals the market value of the fund’s portfolio divided by the fund’s outstanding shares. NAV is typically calculated daily for open-end funds.

Limitations

  • Excludes many intangible assets and human capital that may drive a company’s real value.
  • Based on historical costs and accounting rules, so it may not represent replacement or liquidation values accurately.
  • Less meaningful for asset-light businesses (software, services) and for companies with significant off-balance-sheet assets or liabilities.
  • Differences in accounting policies across firms can limit comparability.

Key takeaways

  • BVPS provides a simple, accounting-based snapshot of per-share equity available to common shareholders.
  • It is useful for value-oriented comparisons but must be interpreted alongside market factors, intangibles, growth prospects, and corporate actions like buybacks and dividends.
  • BVPS is one tool among many and should not be used in isolation to assess a company’s true economic value.