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Book Value Per Share of Common Stock (Formula, Example & Calculation) - YouTube
Channel: WallStreetMojo
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hey folks welcome to wallstreetmojo's
Investment Banking tutorial and today's
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topic is book value per share so book
value per share is as a relatively
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simple topic and it is used to ascertain
if these stalkers overvalued or if it is
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you know undervalued so primarily book
value is used there but you can also use
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the book value to to find out the ROE
for a particular stock alright so let's
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look at the competation of Book value
and then we would look at you know how
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this formula would be useful all right
so when you talk about the competition
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you have book value per share as the as
the total total assets less the total
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liabilities and which leaves us with the
total common stockholders equity and if
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if there is preferred stock that to has
to be deducted from the overall
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stockholders equity which means what
which means that the amount of value
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which is left to the investors like the
basic equity investors so that is that
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is the importance of you know deducting
the preferred stock value from the
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overall stockholders equity and that
divided by the number of common shares
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outstanding would give us the book value
per share so let's try and try and
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understand and look at the value for
book value per share for a company so
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let's say Apple so let's go to Edgar and
find the value for find the company with
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the ticker symbol just a ppl I guess
yeah Apple computers so Appl
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let's search it from here
so Apple Inc and let's look at a 10-Q we
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just need the value from the balance
sheet so 10-Q would do it's the
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quarterly it's it's the balance sheet so
it doesn't matter if it is quarterly or
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annual it's just on a given day so let's
go down here find out the value for
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total assets is 367 billion dollars and
the total liabilities is 240 billion
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dollars so now let's just come here open
it in Excel and find out the book value
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so Book value it's going to be total
shareholders or stockholders whatever
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equity by the number of shares
outstanding
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so total shareholders equity equity is
directly given at times and you can also
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calculate it by doing this total assets
less total liabilities all right so if
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we look at the book value for Apple
computers let's look at it here so the
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total assets is this and total
liabilities is this and the stockholders
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equity is 126 million dollars so this
three hundred and sixty seven billion
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dollars I'm sorry billion dollars less
two hundred and forty billion dollars
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would give us one hundred and twenty six
billion dollars and out of out of this
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if they had like some preferred stock
well you you should have deducted that
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as well so and so let's
well it's pretty name to do this but you
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know wow
so total stockholders equity by the
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number of shares or by the number of
shares outstanding so shares outstanding
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would be so this is total assets and
this is total liabilities and this is
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total stockholders equity and the number
of shares outstanding would be given
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somewhere here so the number of shares
outstanding is yeah so diluted shares
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outstanding for three months ended 31st
March 18 is this much and I think these
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are in millions as well except the
number of shares which are reflected in
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thousands and per share amount so these
are in thousands yeah so this value here
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so this is the number of shares in
absolute terms and the book value per
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share which is be bps it's going to be
total stockholders equity by this and
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now we'll have to adjust this value
because this value is in billion dollars
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and this value is in absolute terms so
we'll have to change this value in
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billion or maybe you can just leave it
you know just put the numbers here okay
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so what happened
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so I guess we'll have to you know change
the values here so so this isn't
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billions now we will also convert this
in absolute so this would be this would
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be this particular number here yeah and
again this would be this particular
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number so 240 billion this is again in
am absolute terms absolute terms this
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and this is going to be so that the book
value comes out to be 25 $25 per share
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so now we'll get back to the website and
find out the other uses of book value so
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book value we have seen the computation
and if you look at the book value for
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google it has been growing at a very
steady rate from 2010 onwards alright
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and this second part here yeah so yeah
the uses of book value so the uses of
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book value is to calculate the first
users to calculate the price to book
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value so now if you know the value or
I'd rather the price of the of the of
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this talk which is Apple computers you
can find out the ratio of price to book
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value so the first users use number one
to calculate the price to book value so
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this would be the stock price of the of
the Apple computers would be can be
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taken from the website like Google
Finance
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yeah so it is 183 dollars it is training
at 183 dollars and the book value per
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share we have calculated is $25 so the
price to book value is 183 divided by
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this value here so which is seven point
three times seven point three times the
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book value that means what this talk is
like overvalued overvalued so investors
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are seeing something which which is not
you know given in the balance sheet you
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know they are seeing some value there
right this is seven times the normal
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Book value of the company and if you can
justify this then you should put in your
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money there all right so this is one use
the second uses to calculate the ROI per
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share so our OE
is nothing but the EPS by the book value
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per share so use to use number two or
and this was used number one so to
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calculate the ro e or share so ro e per
share is net income per share so net
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income per share is what earnings per
share EPS by B VPS so EPS we can
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calculate here it might be given here
somewhere
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so earnings per share diluted earnings
per share is two point seven three so
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two point seven three by the book value
per share is this
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so if you convert it in percentage terms
you'll get the return so the RO e return
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on equity is ten point nine one percent
ten point nine one percent so these are
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the two uses for book value per share
all right the one first uses to find out
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the price to book value this is the
ratio which helps us I said ascertain
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whether the stock is overvalued or
undervalued then the second uses to find
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out the return on equity which is the
return the shareholders the equity
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shareholders are getting all right so I
hope you have enjoyed this and bye for
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now
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