How to calculate book value per share of common stock
Ignore stock options to employees and divide the stock price by the earnings per share. This is the multiple of the stock or a representation of the expected future earnings of the company. Estimate next year's earnings and multiply by the multiple to get next year's price estimate. Use this calculation for financial companies. He is asked to calculate the book value per share of a stock and check if the stock trades at a fair value. Jeremy sees in the company’s balance sheet that the firm has 1,000,000 $1 par value common stocks outstanding with 100,000 shares in treasury, $500,000 of preferred stocks, and $180,000 of retained earnings.