Formula
BPS = net assets (equity) ÷ shares issued
With net assets of KRW 500 billion and 100 million shares issued, BPS is KRW 5,000. Dividing the share price by BPS gives the PBR.
Definition
BPS (book value per share) is net assets divided by the number of shares issued, showing in money terms how much book net assets one share holds. Net assets are what remains for shareholders after liabilities are subtracted from total assets.
BPS is close to the amount left per share if the company closed its doors today, disposed of its assets at book value and repaid its debts. It therefore measures the base value of a share from the angle of assets rather than earnings.
The share price divided by BPS is the PBR. Just as EPS is the base for PER, BPS is the base number for PBR. Jupick does not put BPS directly into the grade, but treats it as the starting point for understanding value from the asset side.
How to read it
A larger BPS means more book net assets in each share. When the share price is below BPS (a PBR below 1), the market is pricing the company below its book value.
BPS carries particular weight for banks, insurers and manufacturers, where assets are the base of earnings. For companies whose key assets, such as brands or technology, barely show up on the books, BPS does not capture the full value.
BPS grows as profits accumulate and shrinks when capital goes out through dividends or share repurchases. Whether BPS is rising steadily shows a company's asset accumulation better than a single year's value.
Points to watch
- Book value differs from actual market value. Old real estate can stay on the books at a low figure and worn-out equipment at a high one, so BPS does not directly mean what the assets would fetch on disposal.
- Because BPS is an absolute amount, it is hard to compare across companies as is. Comparing PBR, which divides by the share price, is fairer.
- A company whose key assets are intangible can have large real value even with a low BPS. The nature of the sector needs to be considered too.