Price to Book Ratio Explained (P/B) | Finance In 5 Minutes!
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- Опубліковано 7 сер 2024
- Price to book ratio, also known as PB ratio in the stock market, is explained simply in this 5 minute video! Price/book ratio is a valuation metric investors use to value a company based on the book value of that company's assets!
Book value is a measure of how much the company would be worth today, if they sold off all their assets and paid back all their liabilities. This only includes tangible assets, so it is not useful to use for companies that derive their value from intangible assets, such as technology companies!
To calculate the price to book ratio, the current share price is divided by the book value per share. Book value per share can be found by dividing the company's book value by the number of shares outstanding in the business.
PB ratio can sometimes reveal red flags in the underlying business. One of which may be when the PB ratio is less than one. This means that the stock is trading at less than the book value of the company, which could mean it's undervalued, or that it is an over priced business.
Another red flag is if a company currently has a negative price to book ratio. This means the company is insolvent, and has more in liabilities than they do in assets!
This video is part of my Stock Market Basics playlist.
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🕒 Time Stamps!
00:00 Intro
00:22 Price to Book Ratio Explained
01:15 PB Ratio Calculation
02:04 Example
03:35 P/B Ratio Less Than 1
04:31 Negative P/B Ratio
05:00 Finding PB Ratio
05:30 Thanks for Watching!
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Disclaimer
This channel is for entertainment purposes only and is not investment advice. All videos published on this channel are informational in nature and are not intended to give advice or recommendations about any particular security or investment. Before making any investment decisions, I would recommend you to speak to a financial professional that is qualified to provide advice.
Do you use price to book ratio when evaluating a stock?
@StonkSlayd what do you mean by ‘need to realize value’?
Only when evaluating REITs.
I do, but not as a stand alone data point. it can be used as one of the many data points that can be used.
@@rookieinvestor6377 Couldn't agree more! Well said!
Yess
Great video I love how you present these kind of ratios, that makes it so much easier to understand for people that are not used to it!
That's awesome feedback! Thank you so much! That's exactly what I'm going for :)
Love the example's use of colors... visually pleasing and easy to understand. Nice video!
I understood and English is not even my first language thank you so much !!!
Great video Ryan! So helpful! 😀
wow u make it very easy to understand. thank so much
Damn, and I was really looking forward to Sam's Scooters IPO but a 3.3x PB scares me 😂. Great video, very in depth as always.
Haha 10/10 comment. Thanks!
@@Rynance no problem, keep up the great content
Great video, superb illustration... Thanks for sharing
Love your videos...thanks for sharing.
This is a great explanation. Makes it easy to understand. Thanks so much for sharing 😀
Absolutely! Thanks for dropping by
Great video man thanks
Brilliant video thank you so much
Thanks for this very good and educational video!
this is the only good video that explained everything so well and idiots like me could understand right away. im subscribing to u now. thank you so v much
Great explanation!!
Bro this actually very helpfully to guide me to buy US stock. Thank U!!!
Very Useful information.... 👌👍
Verry easy explained!
I haven't used this ratio before, but it seems I'm actually missing out! Thanks for the breakdown!
I'm happy I could teach it to you! No prob!
great video my man. Thanks
Outstanding video
Thanks for the education bud!!
I never knew what this was before haha great explanation!
Oh great happy I could help!!
Best video for P/E Ratio
Great vid & breakdown as always bro 👏🏾
Thanks!
great video man
Good explanation!
Excellent 👌👌
Very well explained! Thumbs up!
Much appreciated!
thank you
Great stuff thanks for sharing Rynance!
My pleasure!
Great explanation as always!
Thanks!
Learned something new. Thank you!
You’re welcome!
Awesome video! Keep them coming 🥳
Thanks so much! New videos every week!
Shared this on my facebook as I think this important. Thanks again.
Oh wow thanks so much! I really appreciate that 😀
Loving the longer format!
Awesome! I'll keep making them!
Great explanation, thanks
No problem!
Excellent upload. I am new to P/B. Thanks for this
No problem! Thanks for checking it out!
Thanks
thanks
Nice video. Congrats on the channel growth. Thanks for your support 🙏
Thanks so much!
Good job! 😍👍
Thanks! 😀
Thanks for sharing
No problem!
Good example - I am long Walgreens which currently has a pb ratio of .8. I think this represents value for Walgreens because the stores on typically in high traffic corners and generally have good real estate value. Lots of other reasons I like Walgreens as a long term investment but the intrinsic book value of decent real estate gives me a margin of safety.
Character In the video It's great, I like it a lot $$
I use this metric but not on its own. A good example of a company doing well with no P/E is Spotify. As you mentioned, Tech companies a are a little different.Great share.
Agreed! It’s important to use many metrics together before arriving at conclusion. Thanks!
@rynance
Please start making more videos
Your content is invaluable
is it total assets minus total liabilities? including the future inflows of cash? or money owed to the company? or just current assets minus current liabilities?
For a current P/B ratio you would only be considering the current assets - liabilities. You can also calculate a forward P/B ratio which would take future estimates into consideration
It's hard to find this kind of information in books or Maybe it just me who can't do that.
This made me want a PB n J
LOL
that is an error BVPS it is NOT (A-L) but (total SE/total SO)
is the same thing nav and pbv?
No, NAV and PBV measure different things than PB ratio
I’m still confused so is a p/b greater than 1 good or bad
It is considered to be good to have a P/B greater than 1. Lower share prices relative to book value is considered to be a positive indicator and this ratio is looked at commonly by value investors who are looking to identify stocks that are selling below their intrinsic ("should be") value. Hope this helps! I'm just learning the basics myself.
wouldn't be easier to use equity rather than asset minus liability?
the same thing
Anda boleh memilih untuk salah satu daripada hadiah di atas
Is it true this metric is dying?
Why PB ratio of less than 1 is red flagged, isn't it a bargain? Well, I agree being negative is not desirable
Yeah but not if their assets are intangible, non-current, etc. (hard to liquidate), and if they're bleeding cash. Imo though, if the company has positive free cash flow and trades under NCAV/share, then it's a bargain.
the sound is not good I am quite disappointed
Thanks