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Moo Earnings
wrote a post10/14/2022 21:29
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Earnings Challenge E4|Invest wiser with the P/B ratio in mind

Event Description:
Earnings Challenge E4|Invest wiser with the P/B ratio in mind
This event is to help mooers learn more about the differences among companies and industries, review Fundamental Analysis indicators, and better navigate the market.
"Investing is not about beating others at their game. It's about controlling yourself at your own game. The intelligent investor is a realist who sells to optimists and buys from pessimists." —Benjamin Graham

Challenge Start >>
Rewards
1) 4,000 points: The first 200 users who give correct answers to Questions 1 and 2 will get an equal share of 4,000 points. (e.g., If 100 users win, each user will get 40 points.)
2) Cash Coupons: 3 users who give the best-quality comments will get USD 2 / SGD 2.8 cash coupons. (You can share investment idea, trading experience, and exploration of why Market Cap deviates among the companies.)
Questions
1. What companies do Company A, Company B, and Company C refer to respectively?
2. What's the ranking of Company A, B and C in terms of Market Capitalization?
Reference answer form: A>B>C or A<B<C or C<A≈B (within 10% deviation)
Tips: You can refer to the companies' P/B ratio information below.
Market capitalization = P/B ratio*Book value of assets.

Company A:
Earnings Challenge E4|Invest wiser with the P/B ratio in mind
This company is an American multinational energy company headquartered in Houston. It specializes in the production of natural gas liquids and petrochemicals. In FY2021, it had total revenue of over $111billion. The current P/B ratio is about 1.9.
Company B:
Earnings Challenge E4|Invest wiser with the P/B ratio in mind
This company was founded in 1920 as an integrated oil monopoly and is headquartered in Los Angeles. It produces, sells and transports petroleum, natural gas and other chemical products. Warren Buffett is loading up on it this year. The current P/B ratio is about 3.5.
Company C:
Earnings Challenge E4|Invest wiser with the P/B ratio in mind
The company was founded in 1873 and is headquartered in London. It engages in the exploration, mining, and processing of mineral resources. Its name is Spanish, meaning yellow river. The current P/B ratio is about 1.8.
More Hint:
Earnings Challenge E4|Invest wiser with the P/B ratio in mind
*Finding path: moomoo App → Markets→ Explore→ Stock Compare
How to Play?
Add the stock tickers (e.g., $Tesla(TSLA.US)$) to your answers, plus the Market Cap comparison and related investment ideas if you have any.
Event Period: October 14–October 20

Earnings Wiki:
All about the P/B ratio
Definition: The Price-to-Book ratio(P/B ratio)is a firm's stock price per share to its book value per share. The market value of equity is typically higher than the company's book value.
The P/B ratio measures the market's valuation of a company relative to its book value.
● Common Formula: P/B ratio = Market Price per Share/ [ (Total assets - Total liabilities) / Number of shares outstanding)]
If we change the formula side,
→ Phase one: Market Price per Share = P/B ratio*(Total assets - Total liabilities) / Number of shares outstanding)
If we multiply the shares in both sides,
→ Phase two: Market capitalization = P/B ratio*Book value of assets
Common Usage: Generally, the P/B ratio indicates whether investors pay too much for what would remain if the company went bankrupt. A lower P/B ratio could mean the stock is undervalued. Whereas, it could also mean something is wrong with the company.
The P/E ratio we talked about in E3 mainly applies to companies with stable returns. In contrast, the P/B ratio works better for companies with unstable earnings in cyclical industries, such as the oil, natural gas, and steel. That's because cyclical industries' profits are tied to resource prices or business cycles. Resource prices swing cyclically, and so does the profitability of the companies. But these firms generally have stable net assets values, making the P/B ratio a better indicator for this kind of corporate valuation.


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