If you take the Book Value per share in the quote program, it will be for the last reported quarter from the company. For many of the stocks in the financial or housing sector, the price of the stock is a percentage of Book Value. In other words, if the Book Value is $10 per share, the stock price may be $7 or $6 or even $5 or less. That means the stock is selling for less than the company would be worth if it were to go out of business tomorrow, sell everything and then give the money to its investors.

Of course, the Book Value would be different in real life, either by more or less, because when the company sells all its assets, it gets more or less than what the stated accounting value is. But book value can be useful as a general guide to what the company is worth.

What you'll find as you look through the housing and financial stocks is that a lot of them are selling well below book value. The reason for that is investors believe the company will continue to lose money for some time. So much money that the stock will eventually be worth what it's trading for right now.

Let's do a little more math. If the Book Value is $10 and the stock is selling at $7 a share, the company would have to lose $3 a share in order to reach the $7 level. Is that really possible? To determine that, look at the bigger picture.

In the same quote program, you'll find the number of shares the company has outstanding. In this example, let's assume it's 40,000,000 shares. If the Book Value is $10, that means the equity in the company (the same thing as Book Value) is $400,000,000. If the stock is selling for $7, then investors believe the Book Value is going to at least $280,000,000. That's $400 million minus $120 million ( $3 x 40 million). You're simply taking away the $3 of Book Value for each share.

The expected loss by investors is $120 million to bring the company back into line with its Book Value. Will the company lose that much money? Can it lose that much? It's hard to know, but you have to look at how much the company has already lost and try to determine if there is a lot of loss left or if the company has turned itself around.

As an example, Countrywide Financial Corp. (NYSE: CFC) stated it is going to make a profit this quarter (fourth quarter ending in December). A profit will add to Book Value, not take away from it. Yet the stock sells for 72% of Book Value. It's had one quarter of losses in 25 years of history. Management said it would be back in the black this quarter. Investors obviously don't believe it.

Book Value is only one measure for evaluating a stock. But it's somewhat comforting to know you can buy something on sale in the market once in a while, like 50 cents or 70 cents on the dollar. During this current sub-prime mortgage crisis, as the worst of it slithers through more portfolios (E-Trade (NASDAQ: ETFC) was the latest victim), you'll see more losses. But some companies have written off substantial losses. Some will have written off too much, others too little. It's hard to determine which ones are which. The smart investor will look to buy a little of many of these issues and know that a few will not work out, others will do very well.

While you can't buy a stock based on one number, the Book Value is a good place to start. Do some of the basic math as described here and see how big the losses would have to be to justify a current trading price in the stock. If the stock price is trading well below potential losses, you'll want to dig deeper into it to see if it justifies buying.