Price-to-book Ratio Flashcards
What does the P/B ratio measure?
Whether a stock is over or undervalued by comparing the net value of a company to its market capitalisation
Whether a stock is over or undervalued by comparing the net value of a company to its market capitalisation
What does the P/B ratio measure?
Net value of a company
Assets - liabilities
Assets - liabilities
Net value of a company
What is P/B a good indication of?
What investors are willing to pay for each dollar of a company’s net value
What investors are willing to pay for each dollar of a company’s net value
What is P/B a good indication of?
What does P/B ratio show?
Difference between market value of company’s stock and its book value
Difference between market value of company’s stock and its book value
What does P/B ratio show?
What is the market value?
Price investors are willing to pay for the stock based on expected future earnings
Price investors are willing to pay for the stock based on expected future earnings
What is the market value?
What is the book value?
Derived from a company’s net value and is a more conservative measure of a company’s worth.
Derived from a company’s net value and is a more conservative measure of a company’s worth.
What is the book value?
Why is a P/B ratio of 0.5 attractive?
The market value is 1/2 of the company’s stated book value, meaning market perception turns out to be wrong.
The market value is 1/2 of the company’s stated book value, meaning market perception turns out to be wrong.
Why is a P/B ratio of 0.5 attractive?
How to calculate P/B ratio?
Stock’s share price / book value per share
