 |
| Happy Investor Frog Explains Price to Book Value Calculation |
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.
No comments:
Post a Comment