book value per share
Book Value Per Share is what each share would be worth if a company sold everything, paid every debt, and shared what remained among shareholders.
In plain English
Here is a mistake many Nigerians make when they hear a company's share price has dropped and they rush to buy, thinking the shares are now cheap and undervalued. They forget to ask a simple question first. Cheap compared to what?
Book Value Per Share answers that question. It tells you what a company's shares are worth on paper, using only what is written in its accounts, not what the market feels about it on a given morning. You take the company's total assets, subtract everything it owes, and divide what is left by the number of shares outstanding. That figure is what each share would fetch if the company closed shop today, sold every desk, every generator, every plot of land, paid off every lender, and shared the balance among shareholders.
Say a Lagos based manufacturing company has assets worth ₦8,000,000,000 and liabilities of ₦3,000,000,000. That leaves ₦5,000,000,000 for shareholders. If there are 100,000,000 shares outstanding, the book value per share is ₦50. Now if that share is trading on the Nigerian Exchange at ₦30, some investors get excited and call it a bargain. Others, wiser ones, ask why the market is pricing it below its paper worth. Sometimes it is fear. Sometimes it is because the market knows something the balance sheet does not show, like ageing machinery or a lawsuit brewing calmly in the background.
A relative in London comparing shares in a UK retailer works the same way. If the retailer's book value per share sits at £2 and the share trades at £5, the market is betting on growth the accounts have not yet captured, things like brand strength or future earnings, none of which show up neatly in assets minus liabilities.
Book value per share is not a verdict, it is a starting point, one more number to hold up against the price before you decide whether you are buying value or just buying a story.
A company has total assets of ₦8,000,000,000 and liabilities of ₦3,000,000,000, leaving ₦5,000,000,000 for shareholders. With 100,000,000 shares outstanding, book value per share is ₦50, even though the market may be pricing the share at ₦30 or ₦70.
Questions people ask
Is a share always a good buy if its price is below book value per share?
Not automatically. Sometimes the market is right to be cautious, perhaps because of hidden problems like outdated equipment, unpaid debts not yet visible, or a weak outlook. A low price compared to book value is a reason to look closer, not a reason to buy blindly.
How is Book Value Per Share different from market price?
Book value per share comes from the company's own accounts and reflects historical cost, while market price is what investors are currently willing to pay, shaped by expectations about future growth, sentiment, and events. They can be close, or worlds apart.
Why would a profitable, healthy company still trade below its book value?
This happens more than people expect, often in industries the market has fallen out of love with, or during periods when investors are nervous about the whole economy rather than that specific company. It does not always mean something is wrong with the business itself.
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