Definition of book value

The book value of an asset is its value on a company's balance sheet. This may be different to its market value. The usual method for fixed assets is to value them at cost minus depreciation.

The book value of a stock, also called net book value or net asset value, is the book value of the listed company's total assets minus its total liabilities. In balance sheet terms, this is equal to the company's shareholders' equity, also called net assets or net worth.

Book value per share (BVPS), also called net asset value per share (NAV), is the book value divided by the number of outstanding shares. If a company's share price falls below its BVPS or NAV, the market is pricing the company below the net value of its assets. Research analysts sometimes measure this relationship using the price/book ratio, which is the share price divided by the BVPS. A price/book ratio below 1 may mean the stock is undervalued.


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