Tangible Book Value Per Share (TBVPS)

What it is:

Tangible book value per share (TBVPS) equals a company's net tangible assets divided by its number of shares outstanding. A tangible asset is anything that has commercial or exchange value and has a physical form.

How it works (Example):

The formula for TBVPS is:

TBVPS = Tangible Assets/Shares Outstanding

Let's assume Company XYZ has \$10 million in tangible assets (which appears on the balance sheet) and 1 million shares outstanding. According to the formula, Company XYZ's TBVPS is:

TBVPS = \$10,000,000/1,000,000 = \$10.00

Why it Matters:

TBVPS indicates how much shareholders might get if the company were to liquidate today and the assets were sold for the values reflected on the balance sheet (which really doesn't happen that often). The formula intentionally ignores intangible assets such as patents, trademarks, and intellectual property because they are sometimes considered less "sellable" than hard assets. However, many companies derive most of their value from their intangible assets, so this measure is not necessarily applicable in all industries (technology is a major one).

Accordingly, when TBVPS is higher than the stock price, the company is generally considered undervalued (because theoretically the shares of any company should at least be worth the value of its hard assets).

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