Price to Book Value (PBV) – Formula

Price to Book Value (PBV) abbreviate with the PBV is the ratio of the valuation of investments that are often use by investors to compare the market value of shares of the company with the value of the book. PBV ratio indicates how many shareholders who fund the net asset of the company.

The book value or Book Value gives the approximate value of a company when require to liquidate. The value of this book is the value of assets the company list in a financial statement or Balance Sheet and is calculate by subtracting the company's liabilities from the way its assets (book value = Assets – Liabilities).

In other words, the ratio of Price to Book Value this can indicate what would be obtain by the shareholders after the company sold all its debts have been repaid. PBV ratio that low is a good sign for the company.

Introduction

Price to Book Value or Price/Book Value Ratio helps investors to compare the market value or stock prices they pay per share with the size of the traditional values of a company.

PBV ratio is very suitable for use on a company that has tangible fix assets (tangible assets) is great because it doesn't take into account intangible assets (intangible assets). The company that owns the building, machinery, equipment and other fix assets can use the ratio of Price to Book Value is to examine the financial position of the company appropriately.

PBV ratio is suitable for use in companies engage in financial services such as banks and insurance companies. This is because these companies have enormous financial assets.

PBV formula (Price to Book Value)

PBV or Price to Book Value (price ratio against book value) can be calculate by the price per share shares company is concern with book value per sheet stock (Book Value per Share). The following is the formula for calculating the PBV ratio the share price against the value of the book.

Price ratio against book value = price per sheet the book value per Stock/shares

Price to Book Value (PBV) = Stock Price per Share/Book Value Per Share

Calculation example PBV (Price to Book Value Ratio)

Note:

Price per shares = $ 2,880.
book value per stock sheets = $ 1,944.
price ratio against book value =??



Answer:

Price to Book Value = price per Shares/book value per sheet Stock
Price to Book Value = $ 2,880,-/USD 1,944.
Price to Book Value = 1.48 times

So the Price to Book Value is 1.48 times.

Analysis and assessment of Price to Book Value (PBV)

Price to Book Value ratio (PBV) or the ratio of a stock's price against the value of the book is often use. To assess whether a stock price is cheap or expensive is usually refer to as Stock Valuations. Under PBV company with number "1" is usually consider a stock price is cheap. Whereas PBV ratio above the value "1" can be consider as a valuable stock is expensive.