Sunday, June 09, 2013

Under or overvalued

2 methods to find Book Value (or Net Assets Value)

Method 1
Market capitalization / Total equity
= (Current stock price X Outstanding shares) / Total equity
= Book value

Method 2
  1. Book value per share = Total equity / Outstanding shares
  2. Price-to-book ratio = Current stock price / Book value per share
"A P/B ratio of less than 1.0 can indicate that a stock is undervalued, while a ratio of greater than 1.0 may indicate that a stock is overvalued."

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