What it is
Book value, also known as shareholder equity or net asset value, represents the net worth of a company according to its financial statements. It is calculated by subtracting a company's total liabilities from its total assets. Essentially, it reflects the value of a company's assets that would remain if it liquidated all its assets and paid off all its debts. Book value is an accounting measure, often differing from a company's market capitalization.
Investors use book value, often in conjunction with market price, to evaluate a company's valuation. The price-to-book ratio (P/B ratio), which divides a company's market price per share by its book value per share, helps determine if a stock is undervalued or overvalued relative to its assets. Value investors often seek companies trading below their book value, believing they are getting assets at a discount. However, book value may not fully capture intangible assets like brand reputation or intellectual property.
Why it matters
Book value helps you assess if a stock is undervalued or overvalued relative to its tangible assets, providing a foundational measure of a company's intrinsic worth.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice