P/B is calculated as share price divided by book value per share. Book value is most often calculated as Assets less Liabilities (Equity). However, 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 I used in the calculations below.
A low P/B ratio could indicate a stock is undervalued or distressed. Since GAAP accounting is mostly based on historical cost, a viable growing company will normally be worth more than its book value. However, there are times when good companies will be punished along with the bad. It is our job as investors to separate the good companies from those that have fundamental problems.
Below are several select companies with a P/B below 2.0 for your consideration:
Community Trust Bank Corp. (CTBI) owns and operates Community Trust Bank, Inc., which provides commercial banking services in Kentucky, Tennessee and West Virginia; and a trust company.
P/B: 1.00 | Yield: 5.0%
Franklin Resources Inc. (BEN) is one of the world's largest asset managers, serving retail, institutional and high-net-worth clients.
P/B: 1.34 | Yield: 5.1%
Weyco Group, Inc. (WEYS) designs and markets footwear for men, women and children under various brand names, including Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters and Umi.
P/B: 1.13 | Yield: 5.2%
Old Republic Intl (ORI) is an insurance holding company that engages mainly in the general (property and liability), title, and mortgage guaranty and consumer credit indemnity run-off businesses.
P/B: 1.94 | Yield: 5.2%
National Retail Properties, Inc. (NNN) is an equity real estate investment trust that invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants.
P/B: 1.44 | Yield: 5.9%
Mercury General Corp. (MCY), operating primarily in California, writes a full line of automobile coverage for all classifications of risk.
P/B: 1.51 | Yield: 6.0%
People's United Financial Inc. (PBCT) provides a full range of banking and financial service products to individuals, corporations and municipal customers in the U.S. Northeast.
P/B: 1.97 | Yield: 6.7%
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.
Full Disclosure: Long CTBI, BEN, WEYS, ORI, NNN, MCY, PBCT.
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Tags: CTBI, BEN, WEYS, ORI, NNN, MCY, PBCT,
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