Tangible Book Value Per Share (TBVPS): Definition and Formula

Tangible book value per share (TBVPS) is a measure of a company's net assets minus intangible assets, divided by the number of outstanding shares. It is a useful metric for investors to compare companies with different capital structures and intangible assets.

Definition

Tangible book value per share is calculated by taking a company's total assets and subtracting its intangible assets, such as goodwill and patents. The result is then divided by the number of outstanding shares.

Formula

The formula for tangible book value per share is:

TBVPS = (Total Assets - Intangible Assets) / Number of Outstanding Shares

Interpretation

A high tangible book value per share indicates that a company has a strong balance sheet and is less likely to go bankrupt. However, it is important to note that tangible book value per share does not take into account a company's future earnings potential.

Uses

Tangible book value per share is often used by investors to compare companies with different capital structures and intangible assets. It can also be used to identify companies that are undervalued by the market.

Example

Let's say a company has total assets of $100 million, intangible assets of $20 million, and 10 million outstanding shares. The company's tangible book value per share would be $8 ($100 million - $20 million) / 10 million shares).

Conclusion

Tangible book value per share is a useful metric for investors to compare companies with different capital structures and intangible assets. However, it is important to note that tangible book value per share does not take into account a company's future earnings potential.