Book value growth is probably the most important ingredient in rewarding shareholders over time. A company that can continually increase per share book value at high rates must also increase earnings at high rates. Therefore, it follows that an increase in book value over time must lead to proportionate increases in intrinsic value and share price. “The percentage change in book value in any given year is likely to be reasonably close to that year’s change in intrinsic value,” Buffet wrote to shareholders in 1996.

Book Value Formula:

(Shareholder’s Equity - Liabilities) / Shares Outstanding