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Diamond Foods, Inc. Message Board

  • eurafrules eurafrules May 1, 2013 1:31 PM Flag

    book value

    I imagine this naïve question may draw some negative responses, but...
    What does "Book Value" mean? In what ways can it be inaccurate? Perhaps if a significant write-down is in the works? Or if the company is in decline, the book value is outdated?
    I'm actually not stupid, but I am ignorant and sincerely curious what it means for a company, say DMND, to have a Book Value of $14.76.
    Thanks in advance for your response.

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    • Book value is historical cost.

      Take the Total Stockholder's Equity and subtract the liquidation value of any Preferred Stock plus any Preferred Dividends in arrears divided by the Common Stock issued to get Book Value. Market value is current cost, and it is almost always higher than historical cost.

      If DMND's Book Value is $14.76 you can safely expect Market Value to be ~$21 +. The older the historical cost, the greater the current cost.

      cleto487, pointed out that DMND "stock is trading ( including its debt) below the purchase price [i.e.,historical cost] ( many many years ago) of kettle and Pop secrets alone".

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