Book Value

What is Book Value? — Definition

Book value represents what shareholders would theoretically receive if a company were liquidated and all assets sold at their recorded values. It's calculated as total assets minus total liabilities. On a per-share basis, it's book value divided by shares outstanding.

Investors often compare a company's market price to its book value using the Price-to-Book (P/B) ratio. A P/B below 1.0 means the market values the company at less than its net assets — either a bargain or a warning sign. Banks and insurance companies are frequently valued on P/B. Tech companies often trade at 10x or 20x book because their real value lies in intangibles.

Example

If a bank has $500 billion in assets and $450 billion in liabilities, its book value is $50 billion. If its market cap is $40 billion, it trades at 0.8x book — below book value, which value investors might find interesting.

Book value is one of the filters used in BMInsider's 100X Insider Reports to screen for undervalued companies trading at a discount to their intrinsic value.