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The price-to-book ratio is not as useful for firms with large R&D expenditures or firms with high levels of property or other fixed assets. Since long-term assets are held on the balance sheet at the original cost , if market prices of those assets increases or decreases dramatically, book value can differ dramatically from market value .
The Price-to-Book Ratio (P/B Ratio) is the comparison of a company's market capitalization (or market value) to its book value. Here's how to calculate the P/B ratio: Taking Microsoft, for example, we can take the market cap of 1.89 trillion, and divide it by the $124 billion book value, resulting in a P/B Ratio of 15.24. A P/B ratio over 1.0 ...
14) Price-to-Book (P/B) Ratio . The price-to-book ratio is a measure of a company’s share price in relation to its book value of shareholders’ equity, indicating the price investors must pay for each dollar of book value. Like the price-to-earnings ratio and price-to-sales ratio, this relative metric is better suited for comparisons against ...
Book value and fair value are both used to place a value on an asset, but the difference lies in the way that price is determined: Book value is the carrying value of an asset, which is its original cost minus depreciation, amortization, or impairment costs. It is an estimate of what the asset is worth on the company’s balance sheet – but ...
The price-to-tangible book value ratio excludes the book value of a company's intellectual property and other intangible assets, such as patents and goodwill. As such, it represents what debtholders or investors would receive if the company liquidated its physical assets (assuming that it could get book value for all of those assets).
Price-to-Earnings Ratio (P/E) = Market value per share / Earnings Per Share (EPS) Moving on from the basics, let us do a sample calculation with company XYZ that currently trades at $100.00 and has an earnings per share (EPS) of $5.00. Using the previously mentioned formula, you can calculate that XYZ’s price-to-earnings ratio is 100 / 5 = 20.
How Does Tobin's Q Ratio Work? For example, let's say Company XYZ has $40 million of assets, 10 million shares outstanding and a current share price of $3. Using the formula, we can calculate that Tobin's Q is: Tobin's Q = (10,000,000 x $3) / $40,000,000 = 0.75
The book-to-bill ratio indicates how fast a company can satisfy demand for its products. It may indicate, therefore, that a company is under-selling their product (a ratio of less than 1). It may also indicate that a company needs to invest in speeding up their production and or shipping processes (a ratio of greater than 1) to meet demand.
How Does a Value Stock Work? A value stock may have a high dividend yield (i.e. what percentage the stock yields relative to its price), low price to book ratio (i.e. current closing price of the stock as a percentage of the latest book value per share), and even a low price-to-earnings ratio (i.e. current share price as a percentage of its per share earnings).
How to calculate a PEG Ratio. The formula for the PEG ratio is: PEG Ratio = Price-to-Earnings (P/E) Ratio / Annual Earnings Per Share Growth. The PEG ratio uses the basic format of the P/E ratio for a numerator and then divides by the potential growth for the stock. The two ratios may seem to be very similar but you can see the obvious ...