Price to book value

Google finance uses the price to book ratio. However, in the video Warren Buffet stocks basics, Preston is using price to book value. Are these the same. I am assuming they are, however, I wanted to double check.

Sam

Comments

  • Hi there Sam,

    Yes, they are the same ratio which is;

    Price-to-book value ratio(P/B)

    = Price per share/Book value per share

    P/B can be distorted by share buy-backs and excessive debt so this should be considered when using this ratio, further if one is unsure of the value of intangible assets such as Goodwill one can use a more conservative valuation such as P/TBV(Tangible Book Value) which is;

    Price-to-Tangible book value ratio(P/TBV) = Price per share/Tangible book value per share


    Regards,

    Anaximander

  • Thank you for the advice.
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