How to calculate book value
Published November 5, 2026.
Short answer: book value is what a company owns minus what it owes.
Book value = total assets − total liabilities
To get book value per share, divide that by the number of shares:
Book value per share = book value ÷ shares outstanding
Looking for the book value of an asset instead? If you mean a truck, a machine or a building, book value is a different number: what you paid, minus the depreciation taken so far. A $50,000 truck with $20,000 of depreciation has a book value of $30,000. The rest of this page is about the book value of a company.
Where to find the numbers
Everything you need is on the balance sheet, in the company's annual report.
- Total assets. Everything the company owns: cash, buildings, inventory, money customers owe it.
- Total liabilities. Everything it owes: loans, bills, bonds.
- Shareholders' equity. The difference between the two. Most balance sheets print this line for you, so you often don't need to subtract at all. Shareholders' equity is book value.
- Shares outstanding. Usually on the front page of the annual report.
New to balance sheets? How to read a balance sheet walks through each line.
If the company has preferred stock, subtract it from equity before you divide. Preferred shareholders get paid before common shareholders, so that slice of book value isn't yours.
A worked example
A made-up company, in round numbers:
- Total assets: $900 million
- Total liabilities: $500 million
- Preferred stock: none
- Shares outstanding: 50 million
Book value = $900 million − $500 million = $400 million
Book value per share = $400 million ÷ 50 million = $8.00
So each share has $8 of book value behind it. If the stock trades at $24, buyers are paying three times book value. That ratio is called price-to-book.
Book value vs market value
Book value is an accounting number. Market value is what buyers will pay today.
Price-to-book = share price ÷ book value per share
A price-to-book of 1 means the stock costs exactly its book value. Above 1 means buyers are paying more than book.
For a great business, paying well above book is normal. A strong brand, loyal customers and good management don't show up on the balance sheet. A company can be worth far more than its book value and still be priced fairly. So a low price-to-book is not proof a stock is cheap, and a high one is not proof it's expensive.
Is book value what you'd get if the company closed?
Not really. Book value is what the balance sheet says, not what a buyer would pay. If a company shuts down, a factory worth $1 billion on paper may sell for scrap, because nobody else can use it. Lenders get paid first, and shareholders get what's left. The odd asset, like land bought decades ago, can sell for more than its book value.
Why the growth matters more than the number
Some investors will tell you book value is dead, and only earnings matter. On the level itself, they have a point. Plenty of great businesses trade at many times book, and a low price-to-book often just means a weak business.
The growth is another matter. Book value per share on its own is a snapshot of where the company stands today. How fast it grows tells you whether the business is building value for its owners.
Most of that growth comes from one place: the company earns a profit and keeps some of it. Do that year after year and book value per share compounds. Grow it 12% a year for ten years and it about triples. So book value growth is mostly a record of kept earnings.
Warren Buffett reported Berkshire Hathaway's book value per share growth in his shareholder letters for decades, as a rough scorecard for the owners' stake.
Costco's annual reports show what this looks like:
| Measure | Fiscal 2016 | Fiscal 2026 |
|---|---|---|
| Shareholders' equity | $12.08 billion | $35.80 billion |
| Shares outstanding | about 437 million | about 443 million |
| Book value per share | about $27.63 | about $80.80 |
| Earnings per share | $5.33 | $20.76 |
Book value per share nearly tripled, about 11% a year for ten years. Earnings per share grew about 15% a year. The share count went up slightly, so buybacks didn't do it. Book value grew because Costco's profits grew and it kept much of them.
One reason earnings grew faster than book value: Costco also paid out a lot of cash. In fiscal 2024 alone it declared $19.36 a share in dividends, most of it a one-off special dividend. That cash left the balance sheet, so book value grew more slowly than the business did.
That's the pattern to look for: book value and earnings rising together for a decade.
When book value can fool you
Book value per share is useful, but four things can bend it.
1. Buybacks
When a company buys back its own shares, cash leaves the company, so book value drops. A company that buys back a lot of stock can end up with a small book value, even negative. When book value is small, an ordinary year can show up as a giant percentage.
Mastercard shows the other side. From 2015 to 2025 its earnings per share went from $3.35 to $16.52, about 17% a year. Over the same years it bought back so much stock that its share count fell by about a fifth. Its book value per share only went from about $5.30 to about $8.54, under 5% a year. The business grew far faster than its book value did.
Warren Buffett stopped leading his letters with book value per share in his 2018 letter. One of his reasons: buybacks at a price above book value lower book value per share, even when they make each remaining share worth more. Always check book value growth against earnings growth.
2. Dividends
Dividends also take cash out, so they lower book value. A company paying big dividends can show slow book value growth while doing very well. Look at what the company pays out, not just what stays on the books.
3. Goodwill
When a company buys another company for more than its book value, the extra goes on the balance sheet as goodwill. That pushes book value up, even though goodwill can't be sold off to pay anyone. Analysts who want a stricter number use tangible book value: book value minus goodwill and other intangible assets.
4. The kind of business
Book value works best when the assets on the balance sheet are the business, like a bank or an insurer. For a brand or a software company, much of what makes it valuable isn't on the balance sheet at all. For those, book value growth is still a useful check, but earnings and cash flow matter more.
What book value can't tell you
Book value per share growth tells you a business is building value. It doesn't tell you what the business is worth, or what price to pay.
For that you need two more steps: an estimate of fair value from the company's earnings and growth, and a margin of safety below it. What is intrinsic value? explains the first. The margin of safety guide explains the second. How to find undervalued stocks puts it all in order.
Tracking it without a spreadsheet
Working out book value growth by hand means ten years of balance sheets for every company you follow.
Wonderfolio shows equity growth over 1, 3, 5, 7 and 10 years for each company, next to earnings, sales and cash flow growth. It adds buybacks and dividends back in, so a company that hands a lot of cash to its owners doesn't look like it stopped growing. That fixes the first two problems above. It also estimates fair value from each company's own record, derives buy, watch and sell zones from it, and flags when a price crosses into a buy zone. The decision stays with you.
Want to see it for one company? The free report runs a US or Canadian stock of your choice. Or try the free calculators.
Frequently asked questions
What is the formula for book value?
Book value equals total assets minus total liabilities. It's the same as shareholders' equity on the balance sheet. If the company has preferred stock, subtract that too to get the book value that belongs to common shareholders.
How do you calculate book value per share?
Take shareholders' equity, subtract any preferred stock, and divide by the number of common shares outstanding. A company with $400 million of equity and 50 million shares has a book value per share of $8.
Is a higher book value per share better?
The level matters less than the trend. A book value per share that grows steadily for ten years, alongside earnings, is a sign the business is building value. A high number that isn't growing tells you much less.
Is book value what shareholders get if a company shuts down?
Usually not. Book value is what the balance sheet says, not what buyers will pay. In a shutdown, assets often sell for much less, and lenders get paid before shareholders.
Can book value be negative?
Yes. If a company owes more than it owns, book value is below zero. This often happens after years of large buybacks, not only when a business is in trouble. Check earnings and cash flow before reading anything into it.
What is a good price-to-book ratio?
There isn't one number. Banks and insurers often trade near book value. Businesses with strong brands or software often trade at many times book. Compare a company with its own history and its industry, not with a single rule.
If you check book value growth on a company you own and something surprises you, I'd like to hear which one.
Book value growth, tracked for you
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For research and educational purposes. Not investment advice.