Thursday, September 22, 2016

Price to Book Value - Formula


Price to Book Value Formula

Meaning/ Definition:

‘Price to Book Value (P2BV)’ is a measure of the number of times the book value of a share is trading at in the stock market. The ratio or proportion is obtained by dividing the ‘Current Market Price (CMP)’ of the share by its book value.


Price to Book Value is the second most important metric in determining the fair price of a share, the first being ‘Price to Earnings (PE) Ratio. If the price is less than the book value it is a good bargain. Maximum recommended is 1.5 times, beyond which the price is not fair or reasonable.


Example of Calculation of Price to Book Value Ratio of SJVN Ltd.

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