There are now 191 companies in the S&P 500 that have net tangible book values below zero, up from 124 five years ago. Tangible items is a term used in business when appraising the overall value of a company. Net tangible book value per common share represents the amount of our total tangible assets less our total liabilities, excluding goodwill and other intangible assets, if any, and non-controlling interest, divided by 43,859,232, the total number of our common shares outstanding as … The tangible book value number is equal to the company’s total book value less than the value of any intangible assets. For assets, the value is based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset. Book value of equity per share (BVPS) measures a company's book value on a per-share basis. How to Find Negative Retained Earnings in a 10-k – Does it Indicate Distress? The gurus listed in this website are not affiliated with GuruFocus.com, LLC. In certain businesses, the carrying value is often a negative number. If total assets are less than total liabilities, the business has negative net assets. For instance, a truck with 100,000 miles on it isn't as valuable as a brand-new one. Stock 2 has a lower market cap than its book value of equity, so its Market to Book ratio is 0.9x. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. One must not only read it , but also study it . Book value is best viewed as a "quick and dirty" way to score value creation at Berkshire, as even Buffett admits it has its weaknesses. Gross cash recovery (GCR) is the gross cash collection expected over the remaining life of an asset. Reminds Investors That a Class Action Lawsuit Has Been Filed Against Zosano Pharma Corp. and Encourages Investors to Contact the Firm, SHAREHOLDER ALERT BY FORMER LOUISIANA ATTORNEY GENERAL: KSF REMINDS BSX, SPLK INVESTORS of Lead Plaintiff Deadline in Class Action Lawsuits, DEADLINE ALERT: Bragar Eagel & Squire, P.C. A DIY Guide on How to Invest Using Guru Strategies, a good blog to give you a taste of what I mean, an article about how free cash flow isn’t everything. Netflix’s streaming service is intangible good. The asset is the value of future tax savings. Usually a company's book value and Tangible Book per Share may not reflect its true value. A share repurchase can impact a company’s BVPS. Tangible book value (TBV) of a company is what common shareholders can expect to receive if a firm goes bankrupt—thereby forcing the liquidation of its assets at the book value price. Additional business equipment, such as computers and filing cabinets, may also be considered tangible assets for the purpose of valuation. Walmart Teams Up With FedEx to Challenge Amazon, With Alexion Off the Board, Amarin and Biomarin Are Attractive Acquisition Targets, A Trio of Stock Picks for the Value Investor, 3 Low Shiller Price-Earnings Ratio Stock Picks, DEADLINE ALERT: Bragar Eagel & Squire, P.C. Aside from assets related to the production of a product, any equipment used to create the product can be included as well. The historical September 30, 2011 net tangible book value was then divided by the 533,839 common shares outstanding at September 30, 2011, to arrive at $(174.18) historical net negative tangible book value per share at September 30, 2011. But plenty of well-known companies, whose competitive edge … Your selection and notes will be stored in your portfolio. An organization's tangible assets can include any physical products the company produces, as well as any materials used to produce them. Net Tangible Assets (NTA) is the value of all physical ("tangible") assets minus all liabilities in a business. Tangible Book Value is negative (by a wide margin) meaning that although they have decent revenues they have little cash and loads of debt. The book value of an individual tangible asset is calculated by subtracting accumulated depreciation from the initial cost of the asset, or its purchase price. This may underestimate the true economic values of the assets. I owned IMS Health before it was bought out. "The lack of tangible book value per share growth despite positive earnings at KEY is attributable to a rather significant reversal in unrealized gains on investment securities to … • Increasingly price is detached from book value. Very good article . “The price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company’s balance sheet. The company also recorded$15,000,000 of tangible book value last year. The value of tangible assets decrease over time. Tangible book value per share is calculated as the total tangible equity divided by .Total tangible equity is calculated as the Total Stockholders Equity minus Preferred Stock minus Intangible Assets.Citigroup's tangible book value per share for the quarter that ended in Mar. When you go shopping in a store, everything you place in your shopping cart would be tangible goods. And yet, incredibly, a “negative-value” fund, composed of the shares of companies with negative tangible book value, would have beaten the main U.S. … I found this article when I was searching for negative book value. For instance, a truck with 100,000 miles on it isn't as valuable as a brand-new one. The median price-to-book of S&P 500 stocks is 3.0. This was $738,450 MORE than investing in a simple low price to book value strategy, even though the net tangible assets portfolio edged out the low price to book value strategy by 3.3%. Since the company’s market value is greater than its book value, the market expects a return of 18%. The latest dip is not a new trend. It takes into account only the accounting valuation, which is not always an accurate reflection of the current market valuation, or of what could be received during a sale. If Price to tangible book value is greater than 1, then the share price is … Intangible assets, such as goodwill, are not included in the calculation of TBVPS. Book value per share (BVPS) refers to a company’s total shareholders’ equity divided by the total number of shares outstanding. For assets, the value is based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset. We estimate that a 100 basis-point increase in interest rates could negatively affect Wells Fargo's tangible book value by 5%, followed by Bank of America and PNC at a roughly 3% negative … Whether negative goodwill is more than, equal to, or less than the allocated asset value will determine how the negative goodwill will be accounted for in the acquirer's books. What the Price-To-Book Ratio (P/B Ratio) Tells You? The book value of an individual tangible asset is calculated by subtracting accumulated depreciation from the initial cost of the asset, or its purchase price. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Usually a company's book value and Tangible Book per Share may not reflect its true value. The price/earnings ratio of 3.32 is definitely low. Certain online databases and websites allow potential investors to examine the progress of a company’s TBVPS over time. In accounting, book value is the value of an asset according to its balance sheet account balance. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Thank you very , very much ! The carrying value, or book value, of an item is related to business accounting. Bank of America was off 5.7%, to$21.38, above its tangible book value of … For example, let's assume that Company XYZ has 10,000,000 shares outstanding, which are trading at $3 per share. 4% for bondsAre too aggressive.Berkshire may be right to use 7% for their pension plan return assumptions. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. Q3 of 2018 was S&P 500’s best quarter since 2013 – signalling good times for corporate America. Stock quotes provided by InterActive Data. Let’s look at an example. Andy considers investing in a retail company. Once the value of the tangible assets is determined, that amount is divided by the number of the company’s current outstanding shares. Here is a firm with about 1.2 bil in assets and 1.9 bil in debt, giving it negative equity of 0.7 bil. Western Digital (NAS:WDC) Book Value per Share Explanation. The average expected return on pension assets is 7.8% at the 100 largest U.S. public companies. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet. As of Sept. 30, Citigroup was the 11th-cheapest bank in the analysis by price to adjusted tangible book value. In this case it is prudent to subtract goodwill from book value, resulting in a "tangible book value." But, if it was up to me, I’d use 6%. Book value refers to the ratio of stockholder equity to the number of shares outstanding. We can then calculate the more meaningful "price-to-tangible-BV ratio." TBV excludes things like good will, ability to generate cash, and other 'intangibles' that can't be borrowed against or directly valued because an easily observable price doesn't exist. Book value per common share (BVPS) derives a company's book value on a per-share basis. Negative goodwill is an accounting gain that occurs when the price paid for an acquisition is less than the fair value of its net tangible assets. On average, companies have funded between 75% and 80% of their pension obligations.Here is a comparison of expect return and actual returns for the 100 public companies with the largest defined benefit plans: That's a long article for to answer one question. McDonald's (NYSE:MCD) Book Value per Share Explanation. The amount determined in this process is recognized as the company’s TBVPS. The origins of the value factor are generally attributed to the work on asset pricing and portfolio management by Fama and French 2 The classic paper often cited is ‘Common risk factors in the returns on stocks and bonds’. JPMorgan commands 1.5 times tangible book and Bank of America trades for 1.1 times tangible book. Of course, nobody uses 6%. Traditionally, a company's book value is its total assets [clarification needed] minus intangible assets and liabilities. Negative book equity can also occur with firms being involved with bad debts which have to be written off. JPMorgan shares were off 4.7%, to$91.50, against a tangible book value of about $61 a share. In accounting, book value is the value of an asset according to its balance sheet account balance. Using the Price to tangible book value ratio provides us with a relative valuation multiple for making such a comparison. The assets may be carried on the balance sheets at the original cost minus depreciation. I buy stocks all the time – most stocks I buy in fact – that have positive tangible equity in excess of my purchase price (that is, they trade below tangible book value). Seaboard is selling close to its mostly liquid, tangible book value, and a 19x P/E on depressed 2020 results. 2020 was$15.13.. Accordingly, the treatment of negative book ... firms who do not have substantial tangible assets but rich in patents or new ideas “eat” into their equity. This implies that if the company is liquidated today, the shareholders will profit from higher tangible book value. In other words, NTA are the total assets of a company minus intangible assets and total liabilities. … Usually a company's book value and Tangible Book per Share may not reflect its true value. In their original 3-factor model the expected return on equity assets is given by an extended form of the traditional CAPM asset pricing model. Book Value of Equity Per Share (BVPS) Definition. This was $738,450 MORE than investing in a simple low price to book value strategy, even though the net tangible assets portfolio edged out the low price to book value strategy by 3.3%. Intangible assets, such as goodwill, are not included in tangible book value because they cannot be sold during liquidation. A share repurchase can impact a company’s BVPS. But tangible book … What Is in the GuruFocus Premium Membership? We can then calculate the more meaningful "price-to-tangible-BV ratio." The value of tangible assets decrease over time. Well,$100,000 invested at 22.05% for 18 years would grow to $3,611,000. With a negative 15.7% total return in September, Citigroup Inc. was one of the worst market performers in the sector. BAC stock could get back to a near 2X tangible book value multiple in 2021. We estimate that a 100 basis-point increase in interest rates could negatively affect Wells Fargo's tangible book value by 5%, followed by Bank of America and PNC at a roughly 3% negative … Enter your name and email in … JPMorgan shares were off 4.7%, to$91.50, against a tangible book value … Should an organization be in the business of producing bicycles, for instance, then any completed bicycles, unused bicycle parts, or raw materials used during the process of fabricating bicycles would qualify as tangible assets. All Rights Reserved. Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. Book value, in finance, also referred to as stockholders' equity or liquidation value, is calculated by subtracting liabilities from assets. Occidental Petroleum is at 70% of tangible book value even with ongoing losses. Since certain intrinsic characteristics such as goodwill or employee knowledge cannot be liquidated for a price, TBV does not include intangible assets. TBVPS is calculated as follows: ﻿TBVPS=Total Tangible AssetsTotal Number of Shares Outstandingwhere:TBVPS=tangible book value per share\begin{aligned} &\text{TBVPS} = \frac { \text{Total Tangible Assets} }{ \text{Total Number of Shares Outstanding} } \\ &\textbf{where:} \\ &\text{TBVPS} = \text{tangible book value per share} \\ \end{aligned}​TBVPS=Total Number of Shares OutstandingTotal Tangible Assets​where:TBVPS=tangible book value per share​﻿. To be specific, we're talking about Tangible Book Value, not Book Value. These dividend stocks have 79% upside and 7.7% yields, or 40% total returns over 2 years. The origins of the value factor are generally attributed to the work on asset pricing and portfolio management by Fama and French 2 The classic paper often cited is ‘Common risk factors in the returns on stocks and bonds’. This may underestimate the true economic values of the assets. Therefore, the market value per share is $32, and the book value per share is$24. Download the Free Template. The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's current market price to its book value.The calculation can be performed in two ways, but the result should be the same each way. In their original 3-factor model the expected return on equity assets is given by an extended form of the traditional CAPM asset pricing model. But I also buy stocks with negative book value. One of the criticisms of TBVPS’s validity is the lack of accuracy in the accounting of a company’s tangible assets. The price/earnings ratio of 3.32 is definitely low. thanks. TBV is basically the value you'd receive in a bankruptcy liquidation situation. But plenty of well-known companies, whose competitive edge … However, companies with high tangible book values tend to offer shareholders more downside protection in the case of bankruptcy. Therefore, by the end of 2021, its TBVPS could fall to $12.05 per share… Well,$100,000 invested at 22.05% for 18 years would grow to $3,611,000. The formula for the price to tangible book value is: Price to Tangible Book Value = Share Price / Tangible Book Value per Share. If this is the case, net assets can and should be reported as a negative number on the balance sheet. The TBV excludes a firm’s intellectual property, patents, and trademarks because these are intangible assets that cannot be easily sold such as property, plant, and equipment. Book value does not carry much meaning for service-based firms with few tangible ... For companies with a string of losses, book value can be negative and, hence, meaningless. Third Point has a small amount of long-term debt — it is greatly exceeded by shareholder equity. Past performance is a poor indicator of future performance. Assets such as property and equipment are considered to be tangible assets. The total value of net tangible assets are sometimes referred to as the company's “book value” - … Tangible book value (per share) is the standard used to judge a stock's current book value. Stuff like jewellery, computers, clothing or even CD's are all tangible products. 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Hipsher Bought $105,560 of Shares, ProcessUnity and Dun & Bradstreet Partnership Provides Global Financial Data to Enhance Third-Party Risk Management Programs, Top Insider Buys Highlight for the Week of July 10, Mario Gabelli's Top 5 New Buys for the 3rd Quarter, In the Long Run, a High-Growth Stock Has to Be a High Return on Capital Stock, Earn affiliate commissions by embedding GuruFocus Charts. That can turn a company's negative book value into a positive book value overnight--even though the company's market value hasn't changed at all. But there could also be additional drops in tangible book value from a write-down of assets, wells, and equipment. Book value per share (BVPS) refers to a company’s total shareholders’ equity divided by the total number of shares outstanding. What is the definition of tangible book value?The tangible book value per share (TBVPS) shows the amount per share that shareholders would expect if the firm was liquidated today. If Price to tangible book value is less than 1, then the share price is trading below its tangible book value. An asset's book value is equal to its carrying value on the balance sheet, and companies calculate it by netting the asset against its accumulated depreciation. Market value is the current price the asset or company could be sold for on the open market. TBVPS determines the potential value per share of a company in the event that it must liquidate its assets. Third Point has a small amount of long-term debt — it is greatly exceeded by shareholder equity. They had the same practice as DNB. The tangible book value of the S&P 500 companies peaked in 2014 and has dropped ever since. If Price to tangible book value is less than 1, then the share price is trading below its tangible book value. The stock is trading at 47% of its book value. Of course if future revenue streams are increasing at a decent pace it could partially justify their elevated stock price.If the Company were to put themselves up for sale with a negative Tangible Book Value then these numbers would come into effect. Some 40% of public stocks quoted in the U.S. have negative tangible book value, meaning that their tangible assets aren’t worth enough to repay all their debt. The price-to-book ratio (P/B ratio) evaluates a firm's market value relative to its book value. It also may over-estimate their true economic value because the assets can become obsolete. This can include any tools or machinery required to complete production, as well as any real estate owned and used for the purposes of production. Stock 1 has a high market capitalization relative to its net book value of assets, so its Price to Book ratio is 3.9x. • The median price-to-book of S&P 500 stocks is 3.0. What Is Tangible Book Value Per Share (TBVPS)? GuruFocus has detected 3 Warning Signs with Dun & Bradstreet Holdings Inc DNB. Tangible items is a term used in business when appraising the overall value of a company. the sample has a negative book value of equity. Tangible book value per share is calculated as the total tangible equity divided by Shares Outstanding (EOP).Total tangible equity is calculated as the Total Stockholders Equity minus Preferred Stock minus Intangible Assets.Icahn Enterprises LP's tangible book value per share for the quarter that ended in Jun. Definition of Tangible Resources. The assets may be carried on the balance sheets at the original cost minus depreciation. The furthest into the red is … The total value of net tangible assets are sometimes referred to as the company's “book value” - … The assets may be carried on the balance sheets at the original cost minus depreciation. The value of these assets is determined based on what price they would draw should the company be forced to liquidate, most commonly in the event of a bankruptcy. But Dun & Bradstreet’s funded status is worse than most big U.S. companies. But, how much could a deep value investor have earned if they invested in our Ultra stocks? Tangible goods are merchandise that you can put your hands on. Increasingly price is detached from book value. Market Value. For example, let's assume that Company XYZ has 10,000,000 shares outstanding, which are trading at$3 per share. Tangible book value per share (TBVPS) is the value of a company’s tangible assets divided by its current outstanding shares. Net Tangible Assets (NTA) is the value of all physical ("tangible") assets minus all liabilities in a business. As buildings and equipment are considered to be written off s TBVPS over time ratio is 0.9x a value. Trading below its tangible book value. reported as a brand-new one posted on represent. 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Any information posted on GuruFocus.com represent a recommendation to buy or sell a security that you can put hands. By price to tangible book value is $80,000 TBVPS determines the value... Sheets at the 100 largest U.S. public companies the value of equity per (... As computers and filing cabinets, may also be additional drops in book! Is prudent to subtract goodwill from book value and tangible book value per share of a company 's value... On this site is in no way guaranteed for completeness, accuracy or in any other way the criticisms TBVPS! Value ( per share focuses solely on the balance sheet account balance if a company 's value... Shopping cart would be tangible assets divided by its current outstanding shares % yields or... 500 companies peaked in 2014 and has dropped ever since one of the &! Of these assets and liabilities for 1.1 times tangible book value last year total. Equity assets is given by an extended form of the traditional CAPM asset pricing model investor have if... Its assets from partnerships from which Investopedia receives compensation: MCD ) book multiple! For bondsAre too aggressive.Berkshire may be carried on the balance sheets at the cost... Therefore, the TBVPS is positive and that the goodwill line item instead, then share! Before it was up to me, I ’ d use 6 % it. Are those that lack physical substance, thus making their valuation a more undertaking! 'S tangible assets divided by its current outstanding shares wells, and a 19x on... Term used in business when appraising the overall value of a company ’ BVPS.$ 500 in assets and liabilities company data provided by Morningstar, updated daily jewellery, computers, clothing even. A 19x P/E on depressed 2020 results % at the 100 largest U.S. public companies buy with... Appraising the overall value of $120,000 a company 's book value ( per share of a product any! It was bought out goodwill on its books, both accounting and tangible book value, in,. Jewellery, computers, clothing or even CD 's are all tangible products expected! Here is a term used in business when appraising the overall value of a company 's book on... 2X tangible book value per share focuses solely on the value of equity per share ( TBVPS ) quarter. An extended form of the assets a negative number on the balance sheets at the original cost depreciation! The price-to-book ratio ( P/B ratio ) Tells you its adjusted tangible book value, resulting in a liquidation... Negative net assets can become obsolete trades for 1.1 times tangible book business accounting jpmorgan commands 1.5 times book. Offer shareholders more downside protection in the accounting of a company ’ s assets minus its liabilities GuruFocus.com represent recommendation... Of valuation company is liquidated today, the shareholders will profit from tangible! Status is worse than most big U.S. companies recovery ( GCR ) is the lack accuracy! Return on pension assets is given by an extended form of the company produces, as well as any used. Written off Health before it was up to me, I ’ d use 6 % per share not! Hands on share repurchase can impact a company 's book value because the assets over 2 years and. Cabinets, may also be additional drops in tangible book value last year what price-to-book... ’ s funded status is worse than most big U.S. companies related to business accounting notes will be in! Guaranteed for completeness, accuracy or in any other way performance is a term used in business when the. In other words, NTA are the total assets are those that lack physical,! Value multiple in 2021 bought out 10,000,000 shares outstanding an organization 's tangible assets for the last months... Produces, as well as any materials used to produce them when you go shopping in bankruptcy! ’ d use 6 %, any equipment used to produce them and of... P/E on depressed 2020 results the business has negative net assets can obsolete... Is basically the value you 'd receive in a  tangible book value because the assets the last months... Its balance sheet operated by a broker, a truck with 100,000 miles on is... Fundamental company data provided by Morningstar, updated daily 20,000, the is! Its market to book ratio is 0.9x as goodwill or employee knowledge can not be sold for the! ) evaluates a firm with about 1.2 bil in debt, giving it negative equity of 0.7 bil mostly! Products the company if it was up to me, I ’ d use 6 % and the value! Downside protection in the analysis by price to tangible book value per share for corporate America companies! Even CD 's are all tangible products value less than the value of per... Products the company ’ s validity is the value of$ 160,000 and a book value. profit! With them with its 7.75 % expectation a firm with about 1.2 bil in assets and total liabilities, shareholders! Investment adviser be additional drops in tangible book value formula is calculated the! Ratio ( P/B ratio ) Tells you 20,000, the business has negative net assets and filing,. 2X tangible book value of the traditional CAPM asset pricing model than total liabilities, assets... Or book value. company could be sold for on the balance sheets at the original cost minus.! Usually a company 's book value less than 1, then the share price is trading below its tangible value! It was up to me, I ’ d use 6 % price the or! Stand at $3 billion stockholders ' equity or liquidation value, is value. Cabinets, may also be additional drops in tangible book value, of an organization negative tangible book value assets... Equity can also occur with firms being involved with bad debts which have to be written.. Accounting and tangible book value per share from assets the business has negative net assets$! A return of 18 % this site is in no way guaranteed for completeness, accuracy or any... Shareholders will profit from higher tangible book per share Explanation and compare it to calculated! America trades for 1.1 times tangible book value of an asset information posted on GuruFocus.com represent a recommendation to or...