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How to calculate the value of shares

Updated March 23, 2017

Valuing shares can be done in two ways. The first is the value found on an openly traded market, such as the stock price on the stock market. The other way, more commonly used, utilises the firm's financial statements to determine the value of the shares. This is the amount a shareholder will receive if the firm no longer does business and sells its assets and pays its liabilities.

Locate figures for the total stockholders' equity, preferred equity, and the total common shares outstanding. The company reports total stockholders' equity on the balance sheet as stockholders' equity. Stockholders' equity also equals total assets minus total liabilities. Preferred equity is the amount of preferred stock a company has at its par value. The total common shares outstanding are the number of common stock shares that are sold. For example, a firm has £325,000 in total stockholders' equity, £65,000 in preferred stock, and 200,000 common shares outstanding.

Subtract preferred equity from total stockholders' equity. This removes any claims to the business that supersede common shareholders' claims. In the example, £325,000 minus £65,000 equals £260,000.

Divide the number calculated in Step 2 by the number of common shares outstanding to determine the value per share. In the example, £260,000 divided by 200,000 shares equals £1.30 per share.

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About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.