Understanding P/B Ratio
A P/B ratio of less than one means that the stock is trading at less than its book value or the stock is undervalued and, therefore, a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive.
As a general rule, the higher a company's EPS, the more profitable it's likely to be, though a higher EPS isn't a guarantee of future performance. It's important to remember that the quality and reliability of a company's EPS ratio can be influenced by how the company reports earnings and expenses.
Generally, a smaller price-to-sales (P/S) ratio (i.e. less than 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales.
Current Ratio
The current liabilities refer to the business' financial obligations that are payable within a year. Obviously, a higher current ratio is better for the business. A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts.
If your current ratio is low, it means you will have a difficult time paying your immediate debts and liabilities. Generally, a current ratio of 2 or higher is considered good, and anything lower than 2 is a cause for concern. However, good current ratios will be different from industry to industry.
Generally, a good debt ratio for a business is around 1 to 1.5. However, the debt-to-equity ratio can vary significantly based on the business's growth stage and industry sector. For example, newer and expanding companies often utilise debt to drive growth.
The price-to-book (P/B) ratio measures the market's valuation of a company relative to its book value. The market value of equity is typically higher than the book value of a company's stock. The price-to-book ratio is used by value investors to identify potential investments.
P/E ratio, or price-to-earnings ratio, is a quick way to see if a stock is undervalued or overvalued. And so generally speaking, the lower the P/E ratio is, the better it is for both the business and potential investors.
What should be the ideal price to sales ratio in your business? A PSR of less than 0.75 is extremely desirable for non-cyclical and technology firms, although equities with a PSR of 0.75-1.5 are regarded as strong buys. Those having a PSR greater than three are deemed high-risk.
What is a good PE and PB ratio? A “good” PE ratio varies by industry and market conditions, typically higher for growth companies. A PB ratio under 1 might indicate undervaluation. Both should be evaluated against industry averages and historical company performance for context.
Generally, a low P/E ratio is good
This is because you are spending less money for each dollar of a company's earnings.
A beta coefficient of less than 1 means that a stock tends to be less volatile than the overall market. Utility and real estate stocks are two examples of industries that typically have low betas. A beta coefficient of more than 1 means that a stock tends to be more volatile than the overall market.
Do Banks Low P/B Ratios Indicate Good Value? The banking industry's average P/B value being down near one makes it worthy of consideration by value investors who seek out companies with P/B values below two, with a particular focus on companies showing values of one or lower.
As of today (2025-01-12), Apple's share price is $236.85. Apple's Book Value per Share for the quarter that ended in Sep. 2024 was $3.77. Hence, Apple's PB Ratio of today is 62.87.
Interpretation of P/B Value Ratio
PB ratio > 1 usually implies that the market price is trading at the company's book value premium. It could mean that the stock is overvalued and has high future growth. Conversely, a low PB ratio indicates that the market has relatively low expectations for the company's prospects.
A good PE (Price to Earnings) ratio in India usually falls between 12 and 20, indicating that a company's stock is neither overvalued nor undervalued. This range balances risk and growth potential, making it ideal for Indian stock market investment.
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 115.76. At the end of 2022 the company had a P/E ratio of 30.6.
A P/B ratio that's greater than one suggests that the stock price is trading at a premium to the company's book value. For example, if a company has a price-to-book value of three, it means that its stock is trading at three times its book value. As a result, the stock price could be overvalued relative to its assets.
Lower P/E Ratios can sometimes be a sign that a stock is undervalued relative to its earnings. A better way to tell if a stock has a good P/E Ratio is to compare it against industry averages and growth expectations. Average P/E Ratios generally range from 20 to 25.
Generally, a good debt-to-equity ratio for a business is around 1 to 1.5. However, the optimal debt-to-equity ratio can vary significantly depending on the business's stage of growth and industry sector. For example, newer and expanding companies often use debt to fuel their growth.
Yes, a D/E ratio of 50% or 0.5 is very good. This means it is a low-debt business and the company's equity is twice as high as its debts.
Tesla (TSLA) Debt to Equity Ratio: 0.11. The debt to equity ratio for Tesla (TSLA) stock is 0.11 as of Friday, January 10 2025. It's worsened by 15.72% from its 12-month average of 0.10. The debt to equity ratio is calculated by taking the total debt and dividing it by the shareholder equity.
What Is a Good Debt-to-Income Ratio? As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28%–35% of that debt going toward servicing a mortgage.