Monday, October 20, 2008

Undervalued stocks

Above is a list of companies where their :
  1. Price to Book ratio is less than 0.8 ( This is how i define 'undervalued' )
  2. Market capitalization is more than $500 million (large companies)

However, I will not trust the ,price to tangible book ratio, of REIT and trusts in general. This is because their so called 'book value' could be inflated. As the economy worsens, their assets could be worth less, and hence their stock value will also drop.

Also this list in my opinion, serves to show companies in the stock market that are undervalued and large enough to be relatively stable by as given by the search criteria.

Price to Tangible Book

This is the Current Price divided by the latest annual Tangible Book Value Per Share. Tangible Book Value Per Share is defined as Book Value minus Goodwill and Intangible Assets divided by the Shares Outstanding at the end of the fiscal period.

In short, you take the current price of the company divided by the value of the company if you were to sell the whole company. Being less than one usually means that its undervalue. )

Market Cap

This value is calculated by multiplying the current Price by the current number of Shares Outstanding.

In short, this is roughly how much the total company is worth. Bigger value usually mean that they are a bigger company, hence in my own personal opinion, more stable.

* Credits given to Phillip securities stock research tools.

* The data shown is not an advice to buy/sell the stocks. Always remember to consult your financial adviser before parting with your money.


ZhuangZi said...

Don't quite agree with your statement about REIT and Trust tangible asset value, as they do follow accounting standard like any of the other company out there in valuing their assets.

One main reason for the steep discount to the book value can be attribute to the very fundamental of REIT in that they distribute 90 of their NPI as distribution to unit holder. So unlike other entity, the value of the REIT in reality will deteriorate over time, unless they replenish the existing portfolio.

Also the steep discount is compounded by the concern of refinancing for the REITs, given the current credit market. If you need a good research cpy about this, drop me an email, and I'll forward it to you.

Keep it up dude.

ntuchartist said...


Hmm, I am not sure about the exact way the REITs are evaluated. But I suppose the NAV is dependent on how much their property they have is worth?

If it is as such, wouldn't a devaluing property market cause a drop in their NAV?

Also, could you froward me the research article that you recommend? I would think that I can learn quite a lot of stuff on REITs from there... thanks!