Book Value Per Share: What a Company Would Be Worth If It Closed Tomorrow
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6 min read
Imagine a company shuts its doors tomorrow. It sells everything it owns and pays back everything it owes. What is left goes to the shareholders. Split that leftover cash by the number of shares, and you get book value per share.
It is one of the oldest numbers in investing. It is also one of the easiest to misread. This post shows how to calculate it, where to find it on an IDX report, and why a low or high number does not tell you what a stock is worth.
Start with the balance sheet. This is the page in a company's financial report that lists what it owns (assets) and what it owes (liabilities).
Assets minus liabilities is called equity. It is the part of the company that belongs to shareholders on paper.
Book value per share (BVPS) is equity divided by the number of shares outstanding. Indonesian finance sites give the same basic formula: equity divided by shares in issue (Fortune IDN, Cermati).
"Book" simply means "as written in the accounting books". It is the accountant's number, not the market's.
Here is an invented company, PT Contoh Mesin. It makes industrial parts. It is NetWort arithmetic, not a real company.
| Line | Amount (Rp) |
|---|---|
| Total assets | 30 triliun |
| Total liabilities | 18 triliun |
| Equity | 12 triliun |
| Shares outstanding | 10 miliar |
Book value per share is Rp12 triliun ÷ 10 miliar = Rp1.200.
Now say the stock trades at Rp1.500. The market is paying Rp1.500 for something the books value at Rp1.200. That ratio is called price-to-book value (PBV): 1.500 ÷ 1.200 = 1,25. We go deeper on that ratio in our price-to-book and ROE post.
You rarely need to calculate it by hand. Two numbers do the job:
Fortune IDN notes that the figure can also be found in the shareholders' equity section of a company's financial report. For official numbers on a listed company, use its filings on idx.co.id. We could not open that site during this research, so check it directly.
One catch: some companies also have preferred shares, which get paid first. One Indonesian source subtracts preferred shares from equity and divides by common shares only (Gotrade). Say the invented PT Contoh Mesin has Rp2 triliun of preferred equity. The common shareholders' book value is then (12 − 2) ÷ 10 miliar = Rp1.000, not Rp1.200.
The title of this post says "if it closed tomorrow". That is a handy picture, but it is not exact. Three things break it.
Assets are written at old costs. Accountants often record an asset at what it cost, then reduce it over time. One Indonesian source points out that book value uses the historical cost of assets, so market value is often seen as a better guide (Warta Ekonomi). A factory bought long ago may be worth far more, or far less, than its book number.
A forced sale pays less. A company that closes cannot wait for a good price. Machines sell at a discount. Unpaid customer invoices may never be collected.
Some value is not on the books. Kotak Securities notes that book value does not capture intangible assets such as patents and trademarks (Kotak Securities). Xero adds that brand reputation and customer relationships are also missing (Xero).
This last point matters most today. Some companies own few physical things. Their value is in software, data, people or a brand.
Here is a second invented company, PT Contoh Digital. Again, it is NetWort arithmetic.
| Line | PT Contoh Mesin | PT Contoh Digital |
|---|---|---|
| Equity (Rp) | 12 triliun | 600 miliar |
| Shares | 10 miliar | 2 miliar |
| Book value per share (Rp) | 1.200 | 300 |
| Share price (Rp) | 1.500 | 2.400 |
| PBV | 1,25 | 8,0 |
PT Contoh Digital shows a PBV of 8. That looks very high next to 1,25. But its main assets, the code and the customers, are not on the balance sheet at their worth. A high PBV here may say little about whether the stock is pricey.
So book value per share works best for companies with lots of physical or financial assets, such as banks, property firms and manufacturers. It works poorly for asset-light ones.
Suppose a stock trades at Rp900 while book value is Rp1.200. The PBV is 0,75. Is it a bargain?
Not necessarily. The market may think the assets are overstated. It may expect losses. It may see weak profits on those assets. A price below book can be a warning as easily as an opportunity.
The opposite holds too. A price far above book may reflect strong profits that the books cannot show.
Book value per share is a starting point. Read it together with profit, debt and the type of business.
Pick one IDX stock you own or follow. Find its total equity and shares outstanding, and work out book value per share yourself. Then compare it with the market price. Ask: does this company's value sit in things on the balance sheet, or in things that are not?
Our worked examples use invented numbers, so try it with a real name. A large bank such as BBCA is a good place to start, since banks hold mostly financial assets that the books capture well.
Open the Explore screener on NetWort to look up the stocks you hold and compare their health and price behaviour side by side.