Formula:
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| 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.
Significance:
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:
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| Example of Calculation of Price to Book Value Ratio of SJVN Ltd. |
