The price to book reflects the value that market participants attach to a company's equity relative to the book value of its equity. A stock's market value is a forward-looking metric that reflects a company's future cash flows. The book value of equity is an accounting measure based on the historic cost principle and reflects past issuances of equity, augmented by any profits or losses, and reduced by dividends and share buybacks.
The price to book value is the share Price divided by the book value per share. The BVPS is calculated as follows: (Common Equity less Intangibles divided by the Fully Diluted Shares Outstanding at the end of the period. Market value per share is obtained by simply looking at the share price quote in the market.
A lower P/B ratio could mean the stock is undervalued. However, it could also mean something is fundamentally wrong with the company. As with most ratios, this varies by industry. Another way to look at P/B ratio is the premium that would remain if the company went bankrupt immediately (for example, a 1.6 book value implies a 60% premium).
Formula
Price / BVPS
These ratios combine line-item filing data with stock prices. The price used in the calculation depends on the period of the financials. The latest close price is used for ratios that involve the latest financials, like the most recent quarter or the latest trailing twelve fiscal months (TTM). For ratios that involve older financials, like the quarter one quarter ago, or the TTM one year ago, the price used for the calculation is the closing price from the first trading day following the period statement's announcement date.
Quarterly values from Income & Cashflow statements are annualized to make the resulting factor more readily comparable with 12-month factors. The annualization is done by multiplying the quarterly figures by approximately 4 (depends on the actual number of days in the period).
You can either use a prebuilt ratio or use the function to define your own.
RatioName(offset,type)
offset: 0-24 (for interim) 0-19 (for annual)
type: QTR (for interim), ANN (for annual), TTM (for trailing twelve months)
For example to screen for stocks whose P/E today is less than their P/E from their previous fiscal 4 quarters enter:
PEExclXor(0,TTM) < PEExclXor(4,TTM)
The above can also be done using prebuilt ratios:
PEExclXorTTM < PEExclXorPTM
Below are the available pre-built ratios with the corresponding parameters for the formula. Please note that availability varies by factor.
|
Period |
Description |
Price |
Line Item |
|
Q |
Recent Quarter |
Close(0) |
(0, QTR) |
|
PQ |
Prior Quarter |
AD+1 * |
(1, QTR) |
|
PYQ |
Prior Year Quarter |
AD+1 * |
(4, QTR) |
|
TTM |
Trailing Twelve Months |
Close(0) |
(0, TTM) |
|
PTM |
Prior TTM |
AD+1 * |
(4, TTM) ** |
|
A |
Recent Annual |
Close(0) |
(0, ANN) |
|
PY |
Prior Year |
AD+1 * |
(1, ANN) |
* AD+1: uses the closing price from the first trading day following the period statement's announcement date. For TTM, the AD is that of the latest quarter which is included in the TTM.
** PTM uses interim periods, so the offset is 4, not 1.
Click here for the Line-Item Reference Spreadsheet.