The definition of Price To Book Value (PBV) and the PBV – Price to Book Value formula, abbreviated as PBV, is an investment valuation ratio that is often used by investors to compare the market value of a company’s stock with its book value. This PBV ratio shows how many shareholders are financing the company’s net assets.
Book Value provides an estimate of a company’s value if it is required to be liquidated. This book value is the value of the company’s assets listed in the financial statements or balance sheet and is calculated by deducting the company’s liabilities from its assets (book value = assets – liabilities).
In other words, this Price to Book Value Ratio can show what shareholders will get after the company is sold with all debts already paid. A low PBV ratio is a good sign for the company.
This Price to Book Value or Price / Book Value Ratio helps investors to compare the market value or share price they pay per share with a traditional measure of a company’s value.
This PBV ratio is very suitable for use in companies that have large tangible assets because they do not take into account intangible assets.
Companies that own buildings, machinery, equipment, and other fixed assets can use this Price to Book Value ratio to check the company’s financial position appropriately.
This PBV ratio is very suitable for use in companies engaged in financial services such as banks and insurance companies. This is because these companies have enormous financial assets.
Price To Book Value (PBV) formula
The PBV or Price to Book Value can be calculated by sharing the price per share of the company concerned with the book value per share (Book Value per Share).
The following is the PBV formula for calculating the ratio of Share Price to Book Value.
Price to Book Value (PBV) ratio = Stock Price per Share / Book Value Per Share
Example of Price To Book Value Ratio calculation
As of November 3, 2014, the price per share of BedBookTurn with the issuer code BBTN is $ 28,5, – while the book value per share or book value per share is $ 19,8. What is the price to book value ratio of BBTN?
- Price per share = $. 28,5, –
- Book value per share = $. 19,8, –
- Price to Book Value Ratio = ??
- Price to Book Value = Price per Share / Book Value per Share
- Price to Book Value = $. 28,5 – / $. 19,8 –
- Price to Book Value = 1,43 times
So the Price to Book Value or PBV of BBTN is 1,43 times.
Price to Book Value (PBV) Analysis and Evaluation
Price to Book Value Ratio (PBV) is often used to assess the price of a stock, whether cheap or expensive, which is usually referred to as stock valuation. Companies with PBV below the number “1” are usually considered as stocks with low prices, while the PBV ratio above the value “1” can be considered as stocks with high prices.