What Is Price to Tangible Book Value (PTBV)?

Price to tangible book value (PTBV) is a valuation ratio used to compare the price of a security with the company’s physical assets as reported in its balance sheet.

The tangible book value number includes all physical assets but excludes 澳洲幸运5官方开奖结果体彩网:intangible assets such as goodwill, patents, intellectual property, and trademarks. Since intangibles are excluded, PTBV is cons💯idered a more accurate estimate of the company’s net value to shareholders, after debts are paiꦬd, in the event of liquidation.

Understanding Price to Tangible Book Val🥀ue (PTBV)

A company’s 澳洲幸运5官方开奖结果体彩网:tangible assets are the things of value that it owns. Examples include machinery, equipment, raw maওterials, inventories, vehicles, and buildings.

In theory, a stock’s tangible book value per share represents the amount of money an investor would receive for each share if a company were to cease operations and 澳洲幸运5官方开奖结果体彩网:liquidate all of its assets at the value recorded on the company’s accounting books. In fact, in the event of a liquidation, common-stock shareholders are last inꦰ linℱe to be repaid, after all of the company’s creditors.

As a rule of thumb, stocks that trade at higher PTBV ratios have the potential to leave investors with greater share price losses than those that trade at lower ratꦛios, since the tangible book valu💛e per share can reasonably be viewed as the lowest price at which a stock could trade.

The PTBV Formula

PTBV = Share Price / Tangible Book Value Per Share

Where:

• Share price is the current market price per share of stock.
• Tangible book value per share (TBVPS) is equal to total tangible net assets divided by the total number of 澳洲幸运5官方开奖结果体彩网:shares outstanding.

When to Use Price to Tangible Book Value

PTBV is applicable mainly to industrial or 澳洲幸运5官方开奖结果体彩网:capital-intensive companies like auto manufacturers and oil 🅘refiners. These companies have hard assets of high value.

PTBV is relatively meaningless as a valuation measure in the technology sector, for instance, because much of a tech company’s valuation derives from itꦍs intellectual property😼—an intangible asset.

Calculating PTBV can be tricky in some instances, such as for companies that have land that has been held for decades. The land is stated on the books at its 澳洲幸运5官方开奖结果体彩网:historical cost, not marked up each year on the balance sheet, resulting in 🎐a deceptively high PTBV ratio.

Example of Price to Tangible Book Value

As of the quarter ending June 30, 2023, the tangible book value of General Motors was about $71 billion (total net assets of $276 billion less $5 billion of goodwill and intangible assets minus about $200 billion in liabilities).

There were $1.4 billi👍on in shares outstanding, yield♛ing a tangible book value per share of about $50.7.

The closing price per share of GM on the last trading day of 2023 was $35.72. Theꦺrefore, PTBV on the last tra๊ding day of 2023 was $35.72/$50.7, or $0.70.

An analyst could study the trend of this ratio or compare it with those of its 澳洲幸运5官方开奖结果体彩网:peer group.

The Bottom Line

Price to tangible book value (PTBV) is one of many calculations that analysts may use in an effort to pinpoint the fair value of a public company’s stock🔴.

I🐷t is not particularly relevant to some companies, such as today’s technology gia꧟nts, because their true value lies in their intangible assets such as their intellectual property and patents.

It is more relevant when considering a manufacturer such as General Motors, or any company that relies heavily onᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚ its investments in꧒ machinery, equipment, or buildings.

Correction—July 26, 2024: This article was corrected to update GM’s closing price per share to the last trading day of 2023 and the subsequent PTBV figures.