Definition

The book value per share is a ratio that weighs the stockholders equity against the shares outstanding of a stock.

Calculation

Book Value per Share = stockholders' equity/shares outstanding

ex: Company A has $40m in stockholders' equity divided by 8m in shares outstanding, leaving the Book Value per Share as $5.

Why is this important?

A stock is considered undervalued if its book value per share is higher than the market value per share.