Price to Book Value

Book Value is a company's Total Assets minus Total Liabilities. It is equivalent to Total Equity or Shareholders' Equity. If the company was liquidated, the Book Value would be the money the shareholders will receive.

Increasing Book Value is a good thing. Decreasing Book Value is a bad thing. A good company has an increasing Book Value over time because it is paying down its debt and buying other great businesses. A bad company has a decreasing Book Value because it is acquiring more debt to keep its business afloat.

Comparing the company's Market Capitalization to its Book Value may indicate whether the stock is overpriced or undervalued. This comparison is the Price to Book (P/B) Ratio. Most companies have a ratio of greater than 1. However, a ratio of less than 1 could be a buying opportunity of a lifetime.

The Price to Book Value Ratio can be used to determine the True P/E Ratio of a company's stock portfolio. Just multiply the company's Price to Book Ratio by the P/E Ratio of each of the stocks it owns. This will tell you how much you are really paying for the company's stock portfolio. For example, if Berkshire Hathaway's Price to Book was 2, and Coke's P/E Ratio is 20. The True P/E of Coke would be, 2x20 = 40, for each Berkshire Hathaway share. A good opportunity to by Berkshire Hathaway shares is when the Price to Book Ratio is close to 1, or better, less than 1.


My Financial Analysis of Stocks

  • We Have Bottomed, Next Stop Dow Jones 100,000 The bottom of this recession was on March 23, 2020, when the Dow Jone hit 18,214. This recession was short-lived, it only lasted about 3 months. Our Gross ...
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    Posted Mar 30, 2020, 8:35 PM by Intelligent Investor
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    Posted Mar 18, 2020, 9:21 AM by Intelligent Investor
  • Beyond Meat (BYND) and Dunkin (DNKN), The End Of A Tale Of 2 Speculative Stocks During a recession speculative stocks get pounded down to the ground. Thus, we sold all of our shares of Beyond Meat (BYND) and Dunkin' Donuts (DNKN). Beyond Meat is in ...
    Posted Mar 18, 2020, 9:22 AM by Intelligent Investor
  • The Dow Jones Rallies 1294 Points, Sold More Stocks On This Dead Cat Bounce The Dow Jones jumps 1294 points a few days ago, however, we believe that this rally is a "dead cat bounce". We have to wait for the next quarter's ...
    Posted Mar 16, 2020, 9:56 PM by Intelligent Investor
  • We Panic Sold Today was a really bad day in the market. The Dow Jones opened at negative 1000 points. It seems as if the coronavirus is gaining steam and is about to ...
    Posted Mar 18, 2020, 9:23 AM by Intelligent Investor
  • I'm Calling Tops, It's Over, The Bull Market Is Over, Here Comes The Bear Market, A Recession Is Coming We weren't sure yesterday that the bull market is over. In the morning today, the Dow Jones was up about 300 points, and I thought we were just having ...
    Posted Mar 1, 2020, 10:47 AM by Intelligent Investor
  • Went On A Selling Spree Today I think this stock market bull run is over. I just have a hunch that it's over. However, I've been wrong before. The deadly coronavirus outbreak seems to ...
    Posted Feb 24, 2020, 10:41 PM by Intelligent Investor
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