Book value / share

Book value per share is shareholders' equity divided by the number of shares outstanding — the accounting net worth of the business attributable to each share. Take everything the company owns at its carrying value, subtract everything it owes, and split the remainder across the share count: the result is what the books say stands behind each share.

Two forces move the figure, and they are worth separating. The business moves it by earning: profit kept rather than paid out lands in retained earnings and raises equity. Capital decisions move it mechanically: issuing shares above book value raises it, repurchasing shares above book value lowers it, dividends reduce it dollar for dollar, and items such as currency translation or pension re-measurement pass straight through equity. A rising book value per share is therefore not automatic evidence of a well-run business, and a falling one is not automatic evidence of a badly run one — the source of the change matters more than its direction.

Buybacks deserve the longest pause. A company that repurchases stock above book value shrinks its book value per share while — if the price paid was below intrinsic value — making each remaining share more valuable. Sustained for decades, this arithmetic can push reported equity below zero: several of the most successful serial repurchasers in the American market carry negative book value for precisely this reason, with nothing wrong with the underlying business. When equity is negative the per-share figure stops carrying information, which is why ratios built on it are best shown as not meaningful rather than as a negative number.

The metric earns its keep in financial businesses. A bank is, at bottom, a spread earned on a book of financial assets and liabilities carried close to fair value, so growth in book value per share — plus dividends paid along the way — is the cleanest single record of what a bank has compounded for its owners. Insurers are read the same way. For these companies the balance sheet is the business, and the per-share book figure is the scoreboard most professional buyers of banks and insurers actually price against.

Berkshire Hathaway printed the growth of its own book value per share on the first page of every annual report for over fifty years, and Buffett retired the yardstick in 2018 for an instructive reason: repurchases above book, plus a collection of wholly owned businesses carried at historic cost, had stretched the gap between accounting net worth and intrinsic value until the measure, in his words, had "lost the relevance it once had." The lesson generalises — the more a company's value lives in operating businesses and internally built assets rather than in marked financial assets, the less its book value per share tells you.

The blind spots are systematic. Brands, software written off through the expense line, customer relationships and engineering built in-house all carry at roughly zero, so the equity of an asset-light compounder understates reality by design. In the other direction, goodwill from an expensive acquisition sits in book value at full cost until an impairment forces it down — inflating the figure exactly when capital was destroyed. Old real estate at depreciated cost can hide value; a warehouse of obsolete inventory at cost can hide the opposite.

Moatkeep computes book value per share as stockholders' equity from each company's filed balance sheet divided by shares outstanding, split-adjusted, point-in-time and revised when companies restate. It is the denominator of the price-to-book ratio and one of the two inputs of the Graham number shown on every covered company page, and each figure carries the fiscal period it was computed from.

Used honestly, the number is a record, not a forecast: a decade of book value per share, read next to the return earned on that equity and the dividends paid out of it, tells you what management did with the owners' money. That history — not any single year's figure — is the part a value investor should not skip.