Price-to-book ratio
The price-to-book value ratio ( P / B ratio or P / BV ) is a substance-oriented key figure for assessing the stock market valuation of a stock corporation . Here, the price of an individual share is related to its proportional book value , i.e. the shareholders' equity per share:
Example: According to the annual financial statements , a company has equity capital of 5500 million euros and there are no minority interests in equity. 201 million shares are in circulation in the company. This results in a book value of EUR 27.36 per share. A current share price of 25 euros divided by this value results in a P / B of 0.91.
A traditional theory of value investing says that the lower its P / B, the cheaper a share is, and that its fair value is roughly equivalent to its book value (see also: market value to book value ratio ). More modern valuation methods are based instead on key figures such as cash flow ( DCF method ) and price-earnings ratio .
restrictions
The KBV only takes into account the book value shown in the balance sheet ; Hidden reserves and hidden charges are not included. In particular with investment and real estate companies, there is therefore often a falsified value.
A more meaningful measure that at the actual market value of the assets is based, is the net asset value (English net asset value , NAV) per share.