Tobin's Q
Tobin's Q (or Tobin's quotient) is a business key figure for company valuation . The quotient is named after James Tobin , recipient of the Alfred Nobel Memorial Prize for Economics in 1981, who propagated this indicator from 1968. A common German synonym is market value-book value ratio , although it is actually a market value- asset value ratio or price-asset value ratio . A value less than 1 indicates an undervaluation, a value greater than 1 indicates an overvaluation.
Tobin's Q is determined by dividing the market value of a company ( market value plus liabilities ) by the replacement costs of all assets (not to be confused with the book values under tax or commercial law ):
If this ratio is greater than 1, it means that the company is traded on the stock exchange for a value greater than the sum of its assets. This added value can be achieved by the fact that a company generates more income than could be expected based on the assets. Another reason for a disproportionate market value lies in positive expectations of future earnings, which will drive up a company's stock market price .
A Q less than 1, on the other hand, would mean that the assets have higher replacement costs than the company as a whole. The company is thus traded "below value", which makes it a candidate for a takeover, possibly a debt-financed takeover , since the company as a whole costs less than its parts. Tobin's Q can therefore also serve as a (static) key figure for company valuation for investors .
According to Tobin, a company should have a Q in the region of 1 so that the company's market value roughly reflects the cost it would take to accurately replicate the company; For all companies as a whole, Q (according to Tobin) should always be 1.
literature
- James Tobin: A General Equilibrium Approach To Monetary Theory. In: Journal of Money, Credit and Banking. 1, 1969, p. 15, doi : 10.2307 / 1991374 .