Recently, many people have been asking about stock selection issues, and I found that many novice investors don't really understand the indicator of book value per share. When I study fundamentals myself, I often use this tool as well. Today, let's talk about how to calculate net worth and its significance in actual investing.

Let's start with the most straightforward part. Book value per share is actually the company's net assets remaining after deducting all liabilities, divided evenly among each share. In other words, it represents the book asset value behind each share. The calculation method is simple: divide shareholders' equity by the number of outstanding shares. If a company has 1.5 billion yuan in shareholders' equity and 1 billion shares outstanding, then the net worth per share is clearly 1.5 yuan.

But there's an important misconception to clarify here. Many people think that a higher net worth is always better, but that's not correct. A high net worth doesn't necessarily mean the stock price will rise, nor does it mean the stock is definitely worth buying. The stock price reflects the market's expectations for the future, while net worth only reflects the accumulated book assets from the past. When the stock price is above net worth, the market is willing to pay for the company's growth potential; conversely, if the stock price is below net worth, it doesn't necessarily mean it's cheap. You also need to consider whether the company is facing profit decline or industry recession.

I notice that different industries place varying importance on net worth. For capital-intensive industries like finance, shipping, and steel, net worth is quite important because their asset structures are clear. But for tech companies and software firms, it's different. Companies like NVIDIA, Microsoft, and Netflix derive much of their value from technology, branding, and creativity, rather than book assets. So, for them, just looking at how net worth is calculated can lead to incorrect conclusions.

In practice, I always look at net worth together with the price-to-book ratio (PBR). PBR is the stock price divided by net worth; a lower number indicates relative cheapness. But this is only the first step. What's more important is to compare companies within the same industry and business model, then consider profit trends and industry cycles.

Let me give a few examples. TSMC's PBR is about 4.29, Ford Motor Company is around 1.19, and JPMorgan Chase is approximately 1.94. From these numbers, Ford seems much cheaper, but that doesn't mean Ford is more worth buying, because the business models and growth prospects of these two companies are completely different.

Another common confusion is mixing up net worth and earnings per share (EPS). Net worth shows how many assets a company has, while EPS indicates how much profit the company makes. A company might have high net worth but low EPS, meaning assets haven't been effectively converted into profits; conversely, high EPS but low net worth could indicate an asset-light, high-efficiency model. Both indicators should be considered to gain a more comprehensive understanding of a company.

Finally, I want to say that while calculating net worth is fundamental, real investment decisions require analysis from multiple dimensions. Combining net worth, PBR, EPS, ROE, and industry characteristics can bring us closer to the company's true value. Simply chasing higher net worth can cause you to miss many good opportunities.