Fin – what would you look for to justify a price/book value ratio of
A price/book value ratio of 3.0 would typically be justifiable by examining a company that is growing rapidly and has potential for long-term growth. A company with this ratio may have high levels of liquidity, strong earnings growth, high return on equity, innovative products or services, and/or large market share.
Conversely, a firm with a P/BV ratio of 0.6 may have low liquidity levels, weak earnings growth, low return on equity, outdated products or services, and/or small market share. Additionally this firm may also be facing financial distress due to mismanagement or other factors which might cause investors to value the stock at such a discount relative to its book value.
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