What Book Value (BV) means to investors?

Jul 9 18:23

For decades, value investors have used book value per share as a tool to assess a stock's value potential.

This approach began with Benjamin Graham. Widely considered to be the father of value investing, Graham taught his students that any stocks trading below book value were attractive investments because the companies offered a wide margin of safety and low level of risk.

What's book value?

Book value is the measure of all of a company's assets: stocks, bonds, inventory, manufacturing equipment, real estate, etc.

In theory, book value should include everything down to the pencils and staples used by employees, but for simplicity's sake, companies generally only include large assets that are easily quantified.

How to invest stocks based on book value?

We often use P/B ratio (Price to book) to evaluate certain types of businesses. But if most of a business's assets are intangible -- as is the case with many technology companies -- its price to book may be unhelpfully high.

Price to book can be useful for capital-intensive businesses like banks.

Generally, the lower P/B ratio, the higher investment value.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more