Steve and all,
first of all I assume that with book value, you mean tangible book value. For me, at least the tangible book value is the metric I am looking for, as and high tangible book value indeed may be an indicate of value. i personally don't rat it too high, at least not before looking at the underlying asset that constitute this book value. Often enough a high book value (relative to valuation) is just an indication of overvalued assets. One example may be network assets of telecom service companies that is written down in special writeoffs, destroying the book value. Book value is really an accounting concept, as are earnings. Only cash, and cash flows are "real" and absolute (sometimes accountants even manage to screw up that).
So in short, book value is just one metric i am looking at, and not my favorite at that. Other are cash/share, free cash flow, growth rates, LT business prospects, management quality, price /sales to name a few. "Value" has many forms and is in the eye of the beholder, so a value investor that only looks at high relative tangible book values forgoes many chance to pick up stocks below "fair value". |
