Which are the top high price to book value stocks in India right now?
As per Equitymaster's Stock Screener, here is a list of the top high price to book value stocks in India right now...
- #1 NESTLE
- #2 BRITANNIA
- #3 ADANI GREEN ENERGY
- #4 TRENT
- #5 ADANI TOTAL GAS
Generally, speaking, high PB stocks are considered to be overvalued stocks. And low PB stocks are said to be cheap.
Of course, there are other parameters you should take into account before forming a hard opinion on the stock valuation.
What is the price to book value ratio?
The Price to Book Value (P/B) ratio is a valuation ratio that is used to determine whether a stock is undervalued or overvalued.
It compares the company's stock price with its book value per share.
How is the PB ratio calculated?
The PB ratio is calculated by dividing the stock price by the company's book value per share.
PB Ratio = Stock Price/Book value per share
Watch this video for a detailed explanation of the PB Ratio.
Is a high PB ratio good?
A high price-to-book ratio indicates that a stock is overvalued. A PB ratio that's greater than one suggests that the stock price is trading at a premium to the company's book value.
However, sometimes this could also indicate that investors are willing to pay a premium if the company is expected to generate enough earnings in the future.
What is a good PB ratio?
As per the tenets of value investing, any value under 1 is considered a good value. However, investors often consider stocks with a PB ratio of under 3.
What are the other important parameters to consider when looking at valuations?
One popular ratio, other than PB, is the Price to Earnings ratio (P/E). You can access a list of the most attractive stocks based on P/E here...
EV to EBITDA (Enterprise Value to Earnings before interest, taxes, depreciation and amortization) ratio is also another popular ratio used in the valuation of service companies or companies that are yet to turn profitable.
The thumb rule is that a company with lower EV/EBITDA is more attractive.