Price to Economic Book Value (PEBV)
The price-to-economic book value (PEBV) ratio measures the difference between the market's expectations for future profits and the no-growth value of the stock. Economic book value (EBV) is our measure of the no-growth value of a stock.
Price per share/Economic book value per share = PEBV
When stock prices are much higher than EBVs, the market predicts the economic profitability (distinct from accounting profitability) of the company will meaningfully increase – resulting in a high PEBV. When stock prices are much lower than EBVs, the market predicts the economic profitability of the company will meaningfully decrease – resulting in a low PEBV. If the stock price equals the EBV, the market predicts the company's economic earnings will stay the same into perpetuity – resulting in a 1.0 PEBV.
(NOPAT / WACC)
- Adjusted total debt (including off-balance sheet debt)
+ Excess cash
+ Unconsolidated Subsidiary Assets
+ Net Assets from Discontinued operations
- Value of Outstanding Employee stock option liabilities
- Under (Over) funded Pensions
- Preferred stock
- Minority interests
+ Net deferred compensation assets
+ Net deferred tax assets
= Economic Book Value (EBV)
EBV per share = EBV / by shares outstanding
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