What Is Book Value?
Book value is a company's shareholders' equity on the balance sheet: assets minus liabilities. Book value per share, the price-to-book ratio, and a real bank example.
- book value per share
- price to book ratio
- P/B ratio
- tangible book value
Book value is a company's shareholders' equity as shown on the balance sheet: total assets minus total liabilities. It is the theoretical amount that would be left for shareholders if the company sold everything it owns at exactly the balance-sheet values and paid off every debt. Divided by the share count it gives book value per share, and the share price divided by that figure gives the price-to-book ratio.
How it's calculated
Book value = Total assets - Total liabilities
Book value per share = Common shareholders' equity / Shares outstanding
Price-to-book = Share price / Book value per share
Say a company has $1 billion of assets and $600 million of liabilities. Its book value is $400 million. With 10 million shares, that is $40 per share. If the stock trades at $60, the price-to-book ratio is 1.5: the market pays a dollar and a half for every dollar of equity on the balance sheet.
Two details decide whether a published figure matches your own. The numerator should be equity attributable to the parent company's common shareholders, leaving out noncontrolling interests in subsidiaries. The denominator should exclude treasury shares the company has bought back but not retired, since they carry no vote and no dividend. When two sources disagree on book value per share for the same company, one of those two steps, or the balance-sheet date, is usually the reason.
A real example
JPMorgan Chase's annual report for 2025 shows book value of $126.99 per share at year-end, up 9% from $116.07 a year earlier. Tangible book value, after subtracting goodwill and other intangibles, was $107.56.
The same report gives a market capitalization of $868.79 billion across 2.70 billion shares, which puts the year-end share price at about $322. Price-to-book was therefore about 2.5, and price to tangible book about 3.0. The market was valuing each dollar of the bank's equity at two and a half dollars. For a bank whose assets are mostly loans and securities carried close to market value, that premium needs a profitability story, and the report gives one next to it: a return on common equity of 17% in 2025, after 18% the year before.
Book value works best in exactly this kind of company. Banks and insurers hold mostly financial assets whose value can be checked, so shareholders' equity sits close to what the asset base is really worth.
Where book value breaks down
For companies whose main assets are a brand, software or customer relationships, book value says little. Those assets usually never reach the balance sheet if the company built them itself. Buybacks shrink equity too: Apple ended fiscal 2025 with $73.73 billion of shareholders' equity against a market value above $3 trillion, a price-to-book above 40. That number says nothing about whether the shares are expensive; it says the company has handed most of the capital it earned back to shareholders.
Price-to-book only makes sense next to return on equity. A company earning 20% on its equity justifies a higher price-to-book than one earning 5%, and the pair says more than either ratio on its own.
Related terms
Return on equity divides net income by the same book value. Market capitalization is the market's valuation that book value is compared against. Where price-to-book and the other multiples break is the subject of what a PE ratio is and when it lies.
Real example
JPMorgan Chase reported book value of $126.99 per share and tangible book value of $107.56 at the end of 2025. With a market capitalization of $868.79 billion across 2.70 billion shares, the share price was about $322, a price-to-book ratio of about 2.5.
SourceFrequently asked questions
How do you calculate book value per share?
Divide common shareholders' equity by the number of common shares outstanding at the balance-sheet date. If the company has preferred stock, subtract it from equity first. Banks often print the figure ready-made in their annual report.
What does a price-to-book ratio below 1 mean?
That the market values the company below the equity shown on its balance sheet. It can mean the assets are overstated, that the company persistently earns less than its cost of capital, or that the market expects losses. The ratio alone does not say which of those is at work.
Why does price-to-book fail for technology companies?
Because accounting treats a factory and a codebase differently. Most research and development spending is expensed as incurred under US rules, so a company that invests in engineers carries fewer assets than one that spends the same money on machines. A high price-to-book in that kind of business describes the accounting more than the price.
What is the difference between book value and tangible book value?
Tangible book value subtracts goodwill and other intangible assets, mostly those created by acquisitions, from shareholders' equity. What remains is the part of the asset base that is easier to value and sell. For banks it is often the more important of the two.
Related terms
Related reading
This page explains a term in plain language. It is not investment advice and carries no recommendation to buy, sell, or hold anything.