What Is Value to Tangible Ebook Worth (PTBV)?
Value to tangible e guide price (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible web belongings’ e guide price as reported inside the company’s steadiness sheet. The tangible e guide price amount is equal to the company’s general e guide price a lot much less the cost of any intangible belongings, comparable to patents, intellectual assets, goodwill, and so on.
Key Takeaways
- Value to tangible e guide price (PTBV) measures a company’s market price relative to its hard or tangible belongings.
- The tangible e guide price amount is equal to the company’s general e guide price a lot much less the cost of any intangible belongings.
- In idea, a stock’s tangible e guide price in step with proportion represents the amount of money an investor would download for each and every proportion if a company had been to prevent operations and liquidate all of its belongings.
- Stocks that industry at higher PTBV ratios have the potential to depart investors with upper proportion price losses than those that industry at lower ratios.
- PTBV is suitable principally to industry or capital-intensive companies that private a relatively top proportion of hard belongings.
Understanding Value to Tangible Ebook Worth (PTBV)
A tangible asset (hard asset) is one owned by the use of a company that can be physically touched or handled. Examples include apparatus, equipment, raw materials, inventories, cars, assets, and so on.
In idea, a stock’s tangible e guide price in step with proportion represents the amount of money an investor would download for each and every proportion if a company had been to prevent operations and liquidate all of its belongings at the price recorded on the company’s accounting books.
More often than not of thumb, stocks that industry at higher PTBV ratios have the potential to depart investors with upper proportion price losses than those that industry at lower ratios, for the reason that tangible e guide price in step with proportion can somewhat be regarded as for the reason that lowest price at which a stock would possibly industry.
The PTBV Approach
PTBV = Share Value / Tangible Ebook Worth Consistent with Share
Where:
When to Use Value to Tangible Ebook Worth
PTBV is suitable principally to industry or capital-intensive companies that private a relatively top proportion of hard belongings, as opposed to companies that experience interplay in mild manufacturing or carry out in service-oriented industries.
PTBV is slightly meaningless as a valuation measure inside the era sector, for example, on account of a large number of a tech company’s valuation derives from intellectual assets, an intangible asset. An investor will have to moreover be careful with PTBV for firms that have long-held land. The land is discussed at historical price, not marked up each and every twelve months on the steadiness sheet, resulting in a deceivingly top PTBV ratio.
Example of Value to Tangible Ebook Worth
At the end of 2020, the tangible e guide price of Fundamental Motors was once as soon as $44.44 billion (general web belongings of $235.19 billion a lot much less $5.23 billion of goodwill and intangible belongings a lot much less $185.52 billion in liabilities). $1.4 billion shares had been remarkable, yielding a tangible e guide price in step with proportion of $31.74.
Without equal price in step with proportion of GM on the ultimate day of 2020 was once as soon as $41.64. Because of this truth, PTBV was once as soon as $41.64/$31.74, or 1.31. An analyst would possibly be informed concerning the fad of this ratio or review it with those of its peer crew.
How Does PTBV Vary From Value-to-Ebook (P/B)?
The ones two measures are with regards to an an identical, except P/B will include the e guide price of all belongings, inclusive of intangible belongings. PTBV excludes intangible belongings comparable to intellectual assets (patents, trademarks, and so on.) and goodwill.
When Is PTBV Most Useful?
Today, many companies derive moderately a large number of price from intangible belongings and may not have very many tangible belongings on their steadiness sheet. Thus, PTBV is most respected when evaluating capital-intensive companies that rely on hard belongings, comparable to manufacturers or miners.
What Does PTBV Represent?
PTBV represents {the marketplace} price of a company’s shares as a a few in opposition to the volume it will download if it introduced all of its hard belongings.
