Like the P/E and P/S ratios, the P/B ratio is a metric used to
determine the relative value of a stock. It is calculated by
dividing a company's share price by its book value per share in
the latest quarter. Book value is defined as total assets minus
intangible assets and liabilities. A stock with a book value
under 1 means that it is trading for less than its book value per
share, and a book value over 1 means it is trading for greater
than its book value per share.
A low P/B ratio may mean a stock is undervalued and is a good
jumping off point for further analysis. It is limited when
valuing companies who have a significant portion of non-physical
assets, such as intellectual property, or capital-intensive
companies. It can also be distorted by negative factors like high
debt levels, or others.
These are the stocks trading closest to their historical low P/B
ratios, according to GuruFocus list of Historical Low P/B stocks:
Ecolab Inc. (
), Global Sources (
) and PetroChina Company (
Ecolab Inc. (
Ecolab Inc. (
) is traded at a P/B ratio of 3.3, close to its 10-year low of
3.3. It is owned by 11 Gurus.
Ecolab Inc. is the global leader in cleaning, sanitizing, food
safety and infection control products and services. Ecolab Inc.
has a market cap of $19.09 billion; its shares were traded at
around $63.815 with a P/E ratio of 24.4 and P/S ratio of 2.8. The
dividend yield of Ecolab Inc. stocks is 1.2%. Ecolab Inc. had an
annual average earnings growth of 10.1% over the past 10 years.
GuruFocus rated Ecolab Inc.
the business predictability rank of 2-star
In the fourth quarter of 2011, Ecolab's book value per share
jumped to $19.11 from $9.19 the previous year, and it has
increased to $19.52 at the end of the second quarter 2012. In
2011, the company's assets ballooned due to higher cash and cash
equivalents and inventory. Its debt also increased - from $1.4
billion in 2010 to $9.3 billion by the fourth quarter of 2011.
The fourth quarter was also the quarter that the company closed
its merger with Nalco, the world's leading water treatment and
process improvement company, which added $11.3 billion to its
total assets. The increase in cash on its balance sheet was
mostly used to redeem Nalco's outstanding senior notes in January
2012. The majority of the debt was assumed as part of the Nalco
merger, and addition debt issued to fund the cash portion of the
merger and share repurchases.
In the last year, Ecolab's share price has increased 27%.
Global Sources (
Global Sources Ltd. (Bermuda) (
) is traded at a P/B ratio of 1.3, close to its 10-year low of
1.3. It is owned by four Gurus.
Global Sources Ltd. is one of the world's largest and most
trusted neutral enablers of global merchandise trade. Global
Sources Ltd. (Bermuda) has a market cap of $196.1 million; its
shares were traded at around $6.39 with a P/E ratio of 6.8 and
P/S ratio of 0.9. Global Sources Ltd. had an annual average
earnings growth of 15.7% over the past 10 years. GuruFocus rated
Global Sources Ltd.
the business predictability rank of 3.5-star
Global Sources' P/B is 1.3, but has remained around that level
since the beginning of the year. In the last ten years, the
company has had a prodigious book value per share growth rate of
30.1%. Its total assets have also steadily increased, faster than
In the last 12 months, the company's book value grew 17.1%, while
the stock price declined almost 13%.
PetroChina Company (
PetroChina Company Limited (ADR) (
) is traded at a P/B ratio of 1.2, close to its 10-year low of
1.2. It is owned by 6 Gurus.
PetroChina is engaged in a broad range of petroleum-related
activities, including: the exploration, development and
production of crude oil and natural gas; refining,
transportation, storage and marketing, including import and
export, of crude oil and petroleum products; production and sale
of chemical products; and the transmission, marketing and sale of
natural gas. PetroChina Company Limited (adr) has a market cap of
$220.56 billion; its shares were traded at around $131.15 with a
P/E ratio of 10.4 and P/S ratio of 0.7. The dividend yield of
PetroChina Company Limited (adr) stocks is 5.6%. PetroChina
Company Limited (adr) had an annual average earnings growth of
13.6% over the past 10 years. GuruFocus rated PetroChina Company
the business predictability rank of 4-star
PetroChina's book value has increased at a rate of 18% over the
last ten years, and grew 18.4% in the last 12 months. The
company's stock gained 13% at the same period. PetroChina's book
value per share has only varied by a few tenths of a percentage
point since mid 2009.
China's weak economy has affected PetroChina's earnings. In the
second quarter, the company reported its lowest results in four
quarters at $3.6 billion, compared to $6.2 billion the prior
To see more stocks at their historical low P/B ratios, see
GuruFocus' Value Strategies of Stocks That Are Traded at
Historical Low P/B
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