4 min Read Dec 1, 2022
Book Value represents the net worth of a company as recorded on its balance sheet—calculated by subtracting total liabilities from total assets. It reflects what shareholders would theoretically receive if the company were liquidated today. Investors compare a stock's market price to its Book Value using the Price-to-Book (P/B) ratio to identify whether a stock is undervalued or overvalued. A P/B ratio below 1 can indicate that a stock is trading at a discount to its intrinsic asset value.
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