Book value per share (BVPS) is derived from a company's balance sheet. It represents the total shareholders' equity — total assets minus total liabilities — divided by the number of shares outstanding. In essence, it is the accounting value of the company on a per-share basis.
Investors often compare book value to the current market price to arrive at the price-to-book (P/B) ratio. A P/B below 1 means the market is valuing the company at less than its net assets on paper, which can indicate undervaluation or deep concerns about asset quality.
For asset-heavy industries such as banking and finance, book value is a particularly meaningful metric because the balance sheet is the core of the business. For service or technology companies, intangible assets and future earnings potential matter more, making book value a less reliable standalone indicator.
Sri Lanka's banking sector, which is heavily represented on the CSE, is frequently analysed through the lens of P/B ratios to assess whether banks are trading at a premium or discount relative to their net assets.