BPS (Book Value Per Share) — The Real Value Behind Every Share

 

BPS — Measuring the True Asset Value of Each Share



BPS (Book Value Per Share) — The Real Value Behind Every Share

BPS (Book Value Per Share) is a financial indicator that shows how much a company’s net assets are worth for each share.
It’s often used to evaluate a company’s true value, especially when comparing to the market price.

📘 What Is BPS?

BPS = (Total Assets − Total Liabilities) ÷ Number of Outstanding Shares

For example:
If a company has $100 million in assets and $40 million in liabilities, with 10 million shares outstanding,
then BPS = (100,000,000 − 40,000,000) ÷ 10,000,000 = $6 per share.

This means that if the company were liquidated, each share would represent $6 of net value.

💡 Why BPS Is Important

  • Reflects a company’s real, tangible worth

  • Helps investors find undervalued stocks (when market price < BPS)

  • Used in combination with PBR (Price-to-Book Ratio) to measure value potential

⚖️ BPS vs. Market Price

  • If Market Price < BPS → The stock might be undervalued

  • If Market Price > BPS → Investors may expect growth, brand power, or intangible value

📊 BPS and PBR Relationship

PBR = Market Price ÷ BPS

Together, these ratios help investors judge whether a company is priced fairly or over/undervalued in the market.

⚠️ Limitations of BPS

  • Doesn’t include intangible assets like brand, patents, or goodwill

  • Not always suitable for tech or service industries where physical assets are minimal

  • Must be compared with other indicators like ROE or EPS for balance

📈 In Summary

BPS gives a ground-level view of a company’s real asset value per share.
A higher BPS can signal financial stability, making it a strong base for long-term value investing.

Official Sources:


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