InvestorQ : How and when can investors use P/BV to judge valuations?
Arya Nanda made post

How and when can investors use P/BV to judge valuations?

Answer
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Crowny Pinto answered.
2 years ago


P/BV measures the ratio of the market price to the book value per share.
P/BV Ratio = .or.
P/BV ratio is less popular compared to the P/E ratio for valuing companies. The reason is simple, Book Value (BV) represents a stock and is, therefore, more static. On the other hand, earnings represent a flow and therefore are more dynamic. Hence for most industrial and service companies, P/E offers a much better measure of valuation and for comparisons.
However, banks are an exception! Globally, banks are normally valued based on P/BV since a better bank tends to typically command a better P/BV compared to other banks. However, all these measures are eventually subject to the quality of assumptions made.