Respectfully disagree. Whilst not a perfect measure (are there any?) it is obviously one tool alongside others used by investors.
From my trading platform:
Price to Book Ratio
The ratio of the current price per share divided by book value per share. The book value measures the value of the shareholders ownership in the company, as measured by the last full year balance sheet. The price to book ratio is usually greater than one as the market value will usually exceed the balance sheet value attributed to the assets of the company. This is because assets are generally recorded at their original cost, less any accumulated depreciation. The market, on the other hand, is concerned with the cash-generating ability of the companys assets rather than its historical cost. If an asset can generate returns in excess of its cost of capital, then a premium will be paid for the asset. This premium is the price to book ratio.
from the article...
"I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that AHZ’s ratio of 2.9x is below its peer average of 9.5x, which suggests the stock is undervalued compared to the healthcare equipment and services industry."
from invest0pedia...
"For value investors, P/B remains a tried and tested method for finding low-priced stocks that the market has neglected. If a company is trading for less than its book value (or has a P/B less than one), it normally tells investors one of two things: either the market believes the asset value is overstated, or the company is earning a very poor (even negative) return on its assets." (my bold)
it goes on...(includes discussion of P/B shortcomings)
"If the former is true, then investors are well advised to steer clear of the company's shares because there is a chance that asset value will face a downward correction by the market, leaving investors with negative returns. If the latter is true, there is a chance that new management or new business conditions will prompt a turnaround in prospects and give strong positive returns. Even if this doesn't happen, a company trading at less than book value can be broken up for its asset value, earning shareholders a profit."...(my bold)
and..
"Admittedly, the P/B ratio has shortcomings that investors need to recognize. But it offers an easy-to-use tool for identifying clearly under or overvalued companies. For this reason, the relationship between share price and book value will always attract the attention of investors."...(my bold)
imo, at the end of the day it helps confirm my researched view that AHZ is undervalued and presents a significant opportunity for investors at these levels...we have new management, a new board, new products (new business conditions) and who knows, perhaps at some point, assets to be broken up.
to go back to an earlier point "If an asset can generate returns in excess of its cost of capital, then a premium will be paid for the asset. "....WP has AHZ on the cusp of generating significant returns to shareholders imo
