Book value per common share, also known as book value per equity of share or BVPS, is used to evaluate the stock price of an individual company, whereas net asset value, or NAV, is used as a measure for evaluating all of the equity holdings in a mutual fund or ETF.
Book value per common share is an evaluation measure investors and analysts use to assess a conservative value of a company’s common stock equity. The value generated from the formula for this per share evaluation shows the original value of the company’s stock, adjusted for outflows of dividends and stock buybacks and inflows of earnings modifiers, compared to total current outstanding shares. Book value per common share is calculated as follows:
BVPS = value of common equity / number of shares outstanding
(preferred stock is not included in the calculation)
BVPS can be an important metric that helps investors determine if a stock is undervalued. However, BVPS gives only a narrow picture of the company’s overall current situation without factoring in future prospects, and therefore is an insufficient single indicator of a stock's potential future value.
Net asset value, or NAV, is a per share value calculated for a mutual fund or an exchange-traded fund, or ETF. For any of these investments, the NAV is calculated by dividing the total value of all the fund's securities by the total number of outstanding fund shares. NAV is generated daily for mutual funds. Total annual return is considered by a number of analysts to be a better, more accurate gauge of a mutual fund's performance, but the NAV is still used as a handy interim evaluation tool. Because ETFs are traded in the same way as stocks, their share prices can trade at a premium, or above the NAV, or at a discount, or below, the net asset value. NAV calculations are also used to evaluate real estate investment trusts, or REITs, although precise value of REIT holdings can be difficult to determine.