From Dividend Growth Stocks:
When looking for value-priced stocks, the price-to-book (P/B) ratio is one that I like to focus on. P/B is calculated as share price divided by book value per share. Book value is most often calculated as assets less liabilities.
Some people conservatively calculate book value as assets less intangibles less liabilities. I prefer the latter since it excludes goodwill and other intangibles which would be difficult to recover in a liquidation, and that is what is used in the calculations below.
P/B is like yield, when it is at an extreme you have to question why it is there. If you determine it is the result of an irrational market movement, a purchase could result in both a higher yield and significant future capital appreciation.
A low P/B ratio could indicate a stock is...
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