Book-To-Market Ratio
A ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm's historical cost, or accounting value. Market value is determined in the stock market through its market capitalization.
Formula:
Investopedia Says:
The book-to-market ratio attempts to identify undervalued or overvalued securities by taking the book value and dividing it by market value.
In basic terms, if the ratio is above 1 then the stock is undervalued; if it is less than 1, the stock is overvalued. Related Terms:
Book Value
High Minus Low - HML
Market Capitalization
Market Value
Outstanding Shares
Preferred Stock
Shareholder's Equity |