A company's total assets minus total liabilities as reported on the balance sheet - the accounting value of shareholders' equity per share.
Book value per share = (total shareholders' equity) ÷ (shares outstanding). It represents what shareholders would theoretically receive if the company were liquidated at balance sheet values. The price-to-book (P/B) ratio - market price divided by book value per share - is widely used to identify potentially undervalued stocks: a P/B below 1.0 means the market values the company at less than its accounting net assets, which can signal distress or undervaluation depending on context.
Book value is most meaningful for asset-heavy industries: banks, insurance companies, and industrial manufacturers have balance sheets where tangible assets (loans, investments, equipment) dominate. A bank trading at 0.7× book might be undervalued; the same ratio for a technology company with minimal tangible assets is almost meaningless because most of the value lies in intangibles (brand, IP, software) that are not fully captured on the balance sheet under GAAP accounting.
Tangible book value excludes goodwill and intangible assets from the calculation, giving a more conservative measure used in bank analysis and M&A valuation. Return on Equity (ROE) is closely related: a company that consistently earns high returns above its cost of equity will trade at multiples above book, because the market values not just existing assets but the earning power of those assets.
Worked Example
Bank's balance sheet: Total assets USD 500B, Total liabilities USD 460B. Shareholders' equity = USD 40B. Shares outstanding: 1 billion. Book value per share = USD 40B ÷ 1B = USD 40. Current stock price: USD 36. P/B = 36 ÷ 40 = 0.9×. Trading below book could indicate the market expects loan losses to erode equity, or it could represent value if the bank's credit quality is sound.