Thursday, September 22, 2016

Price to Book Value - Formula

Formula:


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:

Example of Calculation of Price to Book Value Ratio of SJVN Ltd.



Related Links:



No comments:

Post a Comment