This is a low Price to Book based on the writings of David Dreman. He champions a contrarian investment approach based on interpreting market psychology and using value measures to pick stocks that are out of favour with the market. Dreman invests in out-of-favour stocks, often in out-of-favour industries, that he identifies using relatively straightforward metric criteria. "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time."
Dreman warns that the Price to Book strategy in particular may lead to investing in loss-making stocks, at which one needs to be especially careful, and double-checking a company's financial strength is especially important. more »
The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's book value to its current market price and is a key metric for value investors. Book value denotes the portion of the company held by the shareholders; in other words, the company's assets less its total liabilities. This is calculated as the Current Price divided by the latest annual Book Value Per Share (The inverse ratio is known as book to market). We exclude preferred shares in the calculation of Book Value.
As with most ratios, it varies a fair amount by industry (companies that require more infrastructure capital will usually trade at P/B ratios much lower than, for example, consulting firms). P/B ratios are often used to compare banks, because most assets and liabilities of banks are constantly valued at market values. This version includes intangible assets and goodwill, unlike price to tangible book value. The price / book value ratio rarely falls below 1
Stockopedia explains P/B...
This is a key metric for value investors, whereas growth investors typically believe that book value reveals very little about a company's prospects for future performance.
The price / book value ratio rarely falls below 1.0. As with most ratios, it varies a fair amount by industry (companies that require more infrastructure capital will usually trade at P/B ratios much lower than, for example, consulting firms). P/B ratios are often used to compare banks, because most assets and liabilities of banks are constantly valued at market values.
A company that can't make an ROE greater than its cost of capital may be expected to have a low price to book. Therefore, look for a low PBV combined with a high ROE and low default risk.
This is sales over the last 12 months, translated in Pounds Sterling for all companies.
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The sales figure gives a sense for the scale of a company, although companies can have very different profit margins depending on the industry and state of the business, so this may not bear much relation to the earnings figure. Some however argue for the importance of sales, since sales figures are less easy to manipulate than either earnings or book value.
The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms.
Companies with high debt/asset ratios are said to be "highly leveraged". A company with a high debt ratio could be in danger if creditors start to demand repayment of debt.
This is the ratio of Total Current Assets divided by Total Current Liabilities for the same period. NOTE: This item is Not Available (NA) for Banks, Insurance companies and other companies that do not distinguish between current and long term assets and liabilities.
The dividend yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. It is calculated as the historic or consensus forecast Annual Dividend per Share, divided by the current Price, multiplied by 100, and is stated on a net, rather than gross, basis.
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In the absence of any capital gains, the dividend yield is the return on investment for a stock. A higher dividend yield is often considered to be desirable among many investors but it needs to be interpreted in light of the rest of the company's financials.
A high dividend yield may be considered to be evidence that a stock is under priced or alternatively it may be that the company has fallen on hard times and future dividends are at risk of being cut. Similarly a low dividend yield can be considered evidence that the stock is overpriced or an indication that future dividends may be higher. Many growth companies do not pay dividends, preferring to reinvest profits back into the business.