Price to Tangible Book Value (PTBV): Definition and Calculation

Updated July 26, 2024

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Definition

Price to tangible book value (PTBV) is a valuation ratio that compares a company's market price per share to its tangible assets, providing insight into its net value to shareholders after debts are settled.

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开奖号码历史查询:intangible assets such as goodwill, patents, intellectual property, and trademarks. Since intangib𓃲les are excluded, PTBV is considered a more accurate estimate of the company’s net value to shareholders, after debts are paid, in the event of liquidation.

Key Takeaways

Price to tangible book value (PTBV) measures a company’s market value relative to its hard or tangible assets.
The tangible book value number includes all of a company’s physical assets, such as its inventory, equipment, and real estate.
In theory, a stock’s tangible book value per share represents the amount of money an investor could receive for each share of stock if a company were to cease operations and liquidate all of its assets.
Stocks that trade at higher PTBV ratios have the potential to leave investors with greater share price losses than those that trade at lower ratios.
PTBV is applicable mainly to industrial or capital-intensive companies that own substantial hard assets.

Understanding Price to Tangible Book Value (PTBV🍃💝)

A company’s 澳洲幸运5开奖号码历史查询:tangible assets are the things of v🍷alue that it owns. Examples include machinery, equipment, raw materials, 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开奖号码历史查询:liquidate all of its assets at the v🐻alue recorded on the company’s accounting books. In fact, in the event of a liquidation, common-stock shareholders are last in line to be repaid, after a💮ll 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 ratios, since the tangible book value 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开奖号码历史查询:shares outstanding.

When to Use Price to Tangible Book Value

PTBV is applicable mainly to industrial or 澳洲幸运5开奖号码历史查询:capital-intensive companies like auto manufacturers and oil refiners. These companies have hard assets ꦍof high value.

PTBV is relatively meaningless as a valuation measure in the technology sector, for instance, because much of a tech company’s valuation der🗹ives from its 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开奖号码历史查询:historical cost, not marked up each year on the balance sheet, re𒁏sulting in a deceptive♛ly 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 billion in shares outstanding, yiel♌ding 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. Therefore, PTBV on the last trading day of 2023 w🥂as $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开奖号码历史查询:peer group.

How Does PTBV Differ from Price-to-Book (P/B)?

PTBV and price-to-book (P/B) are nearly identical, except P/B includes the value of all assets, including intangible assets. PTBV excludes intangible ass🌠ets such as intellectual property and goodwill.

When Is PTBV Most Useful?

Many of today’s public companies derive most of thei🌱r value from intangible assets and may not have very many tangible assets on their balance sheet. Thus, PTBV is not a rea𒁏sonable way to measure the company’s value.

PTBV is most useful when evaluating capital-int🌺ensive companies that rely on hard assets, such as manufacturers or mining companies.

What Does PTBV Represent?

PTBV represents the market value﷽ of a company’s shares as a multiple 💦against the amount it would receive if it was forced to sell off all of its hard assets.

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.

It is not particularly relevant to some companies, such as today’s technology giants, because their true valu🌼e 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 on 🥂its investments in machiner♊y, 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.

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