Of course you always want to include goodwill in book value /...

Of course you always want to include goodwill in book value / equity. The point is to understand how much money the company makes compared to all the money that has been previously put into the company. Goodwill represents cash they spent on some overpriced asset. So returns need to be proportionate to equity, not just tangible equity.

Return on equity is usually calculated against the full equity, including goodwill.

So if the ROE is 12%, and the stock is trading at 1/3 of book value, then you would expect a simple return of 30% on the stock. That is calculated by Return on Equity * ( Equity Per Share / Target Price Per Share ).

That's just a rule of thumb for establishing a simple return, if the company pays out all earnings as a dividend. In this case they are retaining earnings, so you would expect a better return, but I'm too lazy to do the more complicated math. :) The point is even doing the simple calculation for a more conservative case, this stock is cheap.