Episode 6 - Stock Valuation: Understanding Book Value for Beginners

The Foundations of the price-to-book (P/B) financial metric

6 months ago

Episode 6 - Stock Valuation: Stock Valuation: Understanding Book Value for Beginners

A Video Version of this episode: http://bit.ly/2C4xqHP

1) Book value IS NOT market value!!! Book value, or equity, is an accounting construct that at times diverges from economic reality. (So just because a company is trading below book value doesn't mean it's necessarily cheap; and vice versa, not all stocks trading above 1x book value are expensive).

2) Here's the computation for P/B: (method 1) = Market capitalization / equity (method 2) = price per share / book value per share.

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