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

  • Swapped Disney (DIS) for more ViacomCBS (VIAC) A couple of months ago, we sold our shares in Disney (DIS) in exchange for ViacomCBS (VIAC). Unfortunately for us, we had to take our meager profits in Disney and ...
    Posted Jan 17, 2022, 11:36 AM by Intelligent Investor
  • Archive: My Stock Holdings 2020 View My Analysis: My Stock Holdings 2020
    Posted Jan 23, 2022, 6:55 PM by Intelligent Investor
  • Archive: My Stock Research 2020 View My Analysis: My Stock Research 2020
    Posted Jan 23, 2022, 6:56 PM by Intelligent Investor
  • Buying the Dip in ViacomCBS (VIAC) and Sold Pfizer (PFE) A very big opportunity came today to buy ViacomCBS (VIAC) at a ridiculously low price. Unfortunately we had to sell Pfizer (PFE). Pfizer has been a big disappointment for us ...
    Posted Mar 29, 2021, 12:09 AM by Intelligent Investor
  • Accumulating ViacomCBS (VIAC) We believe there is a greater opportunity in ViacomCBS (VIAC). We have been accumulating the stock for the past year. Our analysis is a mere common sense. During the course ...
    Posted Jan 25, 2021, 5:25 PM by Intelligent Investor
  • Sold AXP, BRK.B, JPM, and WFC We sold all of our shares in American Express (AXP), Berkshire Hathaway Class B (BRK.B), J.P. Morgan (JPM), and Wells Fargo (WFC).American Express (AXP) - We just do ...
    Posted Jan 19, 2021, 7:53 PM by Intelligent Investor
  • 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 ...
    Posted Jun 8, 2020, 12:32 PM by Intelligent Investor
  • Archive: My Stock Research 2019 View My Analysis: My Stock Research 2019
    Posted May 21, 2020, 9:21 PM by Intelligent Investor
  • Archive: My Stock Holdings 2019 View My Analysis: My Stock Holdings 2019
    Posted May 21, 2020, 9:21 PM by Intelligent Investor
  • Another Dead Cat Bounce, We Haven't Bottomed Yet, Goldman Predicts S&P 2000 The Dow Jones has rallied to 22,327 over the past several days. However, we believe this is another dead cat bounce. We sold all our shares of United Health ...
    Posted Mar 30, 2020, 8:35 PM by Intelligent Investor
Showing posts 1 - 10 of 55. View more »