At current value, the price-to-book
value of the company was 6.
Morris uses the price-to-book
ratio, a measure of a stock's value in comparison to the worth of a company's hard assets, to separate the winners from the losers.
We studied five years of data, including market values, returns on assets, returns on equity, price-to-book
ratios, price-to-earnings ratios and revenue growth.
On the other hand, growth investors specialize in hot or emerging markets and companies with high P/E, price-to-book
and price-to-cash-flow ratios.
Investors are taking another look at price-to-book
and price-to-earnings ratios,'' said Daniel Eagan, a portfolio manager at Black Rock in Philadelphia.
Of these ratios, price-to-book
is the one preferred by Charles Smith, chief investment officer of Fort Pitt Capital Group, Pittsburgh.
Although some comparable companies continue to trade at below-book values in the after market, companies able to improve profitability and withstand public-market competition have been rewarded with higher price-to-book
AN INVESTOR WHO IS WILLING TO follow the value school of investing should consider eight factors in selecting securities (or mutual funds), including price-to-earnings ratio, price-to-cash flow ratio, price-to-book
value ratio, dividend yield, private market value, adjusted net working capital, insider buying and stock repurchases.
While the price is fairly rich by value-investing standards, ``we don't define value necessarily in the conventional way, which focuses on low price-to-earnings and price-to-book
and high yield,'' he said.
Eley says a low P/E is nice, but he's also looking for a sizable dividend yield and a low price-to-book
value to signal a good time to buy shares.
Health insurer Cigna (NYSE: CI) not only sells at a P/E of 15, but at a miniscule price-to-book
ratio of 2.