Tangible Book Value Per Share (TBVPS)
What is Tangible Book Value Per Share (TBVPS)?
How Does Tangible Book Value Per Share (TBVPS) Work?
The formula for TBVPS is:
TBVPS = Tangible Assets/Shares Outstanding
TBVPS = $10,000,000/1,000,000 = $10.00
Why Does Tangible Book Value Per Share (TBVPS) Matter?
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 (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 undervalued (because theoretically the of any company should at least be worth the value of its hard assets).price, the company is generally considered