Ann: J P Morgan Emerging Companies Forum Presentation, page-5

@Just_a_guy ,

Depends on the rate of organic growth in the earnings for such a business.

In isolation, P/B is at best, merely broadly indicative of valuation.

Because, as you know, the relationship between P/B and ROE is an exponential one, not a linear one (because of the compounding effect... when a company earns in excess of its cost of capital it is adding to the value of that invested capital each year), and companies that are able to expand their asset base and earnings at a fast rate will be generating surplus capital to be reinvested at ever increasing rates, and therefore their P/B will be higher than companies with similar levels of ROE, but which are slower growing.