Recently, many people have been discussing how to determine if a stock is cheap or not. In fact, most are stuck on one point: looking at book value per share alone is not enough.

Book value per share is the amount of a company's net assets divided equally among each share; simply put, it's the book value. The calculation is straightforward: divide shareholders' equity by the number of outstanding shares. For example, if a company has 1.5 billion yuan in shareholders' equity and 1 billion shares outstanding, the book value per share is 1.5 yuan. But it's important to note that this number is only on the books; it doesn't mean the stock will rise to that price in the future, nor does it represent the company's true market value.

I’ve found that many novice investors tend to fall into a misconception, thinking that a higher book value per share is always better. Actually, that's not the case. The relationship between stock price and book value isn't so direct. The stock price reflects the market's expectations of the company's future earning ability, while book value is more about accumulated past assets. When the stock price is above book value, the market is usually willing to pay a premium for growth; conversely, a stock trading below book value doesn't necessarily mean it's cheap—it's important to check whether the company is facing declining profits or industry decline.

A more practical approach is to use the Price-to-Book Ratio (PBR) to evaluate. The calculation is simple: market capitalization divided by book value per share. A lower PBR indicates relative cheapness, but this is just the first step. The key is to compare it among companies within the same industry and business model, and then consider profit trends and industry cycles for judgment.

Regarding the application of book value in U.S. stocks, I recently saw some good examples. For instance, JPMorgan Chase has a PBR of about 1.94, Ford Motor around 1.19, and General Electric approximately 0.70. These are relatively cheap financial and industrial stocks. But an important point is: the applicability of the book value indicator varies across industries.

For capital-intensive industries like finance, shipping, steel, energy, and manufacturing, book value per share is quite meaningful. These companies have clear asset structures, and changes in book value can truly reflect operational status. But for tech companies like NVIDIA, Netflix, and Microsoft, much of their value comes from technology, branding, traffic, or R&D capabilities, not from tangible assets on the books. So, relying solely on book value can completely miss their true investment value.

My personal experience is that book value per share should be combined with earnings per share (EPS), return on equity (ROE), gross profit margin, and growth rate. Book value shows how much assets are on the books, while EPS indicates how much profit is earned per share. If a company has a high book value but low EPS, it may mean assets aren't effectively converted into profits; conversely, high EPS with low book value could suggest a low-asset, high-efficiency business model.

Checking book value is also easy. Most trading platforms and stock websites display it directly when you input the stock code, or you can calculate it yourself from the financial reports. The formula is simply shareholders' equity divided by the number of outstanding shares.

In summary, book value per share is an important starting point for understanding stock value, but it’s definitely not a standalone tool for making conclusions. Good investment judgment involves integrating book value, PBR, EPS, industry characteristics, and other indicators to get closer to the company's true investment value. Chasing only high book value can cause you to miss many genuinely worthwhile investment opportunities.