Book Value of Equity Per Share (BVPS) is a financial metric that represents the per-share accounting value of a company’s equity. It is calculated by dividing the book value of equity by the number of outstanding shares. BVPS is also known as book value per share or net asset value per share.

The formula for calculating Book Value of Equity Per Share is as follows:

\[ \text{BVPS} = \frac{\text{Book Value of Equity}}{\text{Number of Outstanding Shares}} \]

Here’s what the components of the formula represent:

– **Book Value of Equity:** This is the difference between a company’s total assets and total liabilities. It represents the net worth or shareholders’ equity of the company. The formula for calculating book value of equity is \( \text{Book Value of Equity} = \text{Total Assets} – \text{Total Liabilities} \).

– **Number of Outstanding Shares:** This is the total number of shares of the company’s stock held by investors.

**Interpretation:**

– **Positive BVPS:** A positive BVPS indicates that the company has a positive book value of equity, meaning its assets exceed its liabilities. This implies a positive net worth attributable to shareholders.

– **Negative BVPS:** A negative BVPS occurs when the company’s liabilities exceed its assets. This could happen in financially distressed situations, but it does not necessarily mean the company is bankrupt.

**Usage and Considerations:**

– **Valuation Comparison:** Investors often compare BVPS to the market price per share to assess whether a stock is undervalued or overvalued. If the market price is lower than the BVPS, it could indicate that the stock is trading at a discount to its book value, which might be attractive to value investors.

– **Tangible Book Value per Share:** Some analysts focus on tangible book value per share, which excludes intangible assets like goodwill. Tangible book value provides a more conservative measure of a company’s net worth.

– **Industry and Sector Comparisons:** BVPS is useful for comparing the financial health and valuation of a company to those of its peers within the same industry.

– **Changes Over Time:** Investors may track changes in BVPS over time to assess the company’s ability to create shareholder value.

It’s important to note that BVPS is based on historical accounting data, and the market value of a company’s equity may differ significantly from its book value, especially for companies with intangible assets or in dynamic market conditions. Investors typically use BVPS in conjunction with other financial metrics for a more comprehensive analysis.