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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (56488)12/31/2015 7:05:59 PM
From: Graham Osborn1 Recommendation  Read Replies (1) of 78749
 
Just a couple more thoughts.. like all ratios the P/ b should depend on the growth rate of the denominator. Mergermania has made this tricky since goodwill on balance sheets is being used to conceal negative tangible book. Smart acquisitions don't erode tbook over the long term. Noteworthy exceptions to stupid acquisition syndrome are stalwarts like WMT, BRK, GOOG. That's why I use tangible book. I will even forgive apparently poor operating metrics or apparently poor cash flow in certain cases if consistent growth in tbook implies a different story. That's also why 10-year samples may be biased since accounting conventions tend to be reflexive. But that is often the most data you can pull and I do use it (08-09 mostly).
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