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.

PEBV Formula:

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.

EBV Formula:

(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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