Question From a Student
I was thinking about stocks over the weekend and something about book value bothered me. Assume you have a large company with a high book value relative to their stock price. Lets say its a company that owns real estate. Wouldn't it be very hard to extract the equity from the company assets because it is hard to sell property, especially in this type of economy? So, would this mean that, even though the company might look promising because of a high book value, it might not be a good buy?
Going on the same thread. When you look at a balance sheet, how can you tell what type of assets the company has? On the Yahoo Finance sheet, it has Property/Plant/Equipment, Long Term Investments, Goodwill, and other stuff. What type of assets go in which category?
Oh yeah, is there any way to read Valueline online? It's kind of hard for me to go to the library, so I wanted to see if there was a website or something that had the same info.
Going on the same thread. When you look at a balance sheet, how can you tell what type of assets the company has? On the Yahoo Finance sheet, it has Property/Plant/Equipment, Long Term Investments, Goodwill, and other stuff. What type of assets go in which category?
Oh yeah, is there any way to read Valueline online? It's kind of hard for me to go to the library, so I wanted to see if there was a website or something that had the same info.
A Response in the Comment Section Below
Your concern about book value is very accurate. Remember, all financial data is subject to interpretation. I seldom rely on this information for my final investment decisions. The only reason I do look at it is to find errors or discrepancies. Inaccurate, inconsistent or flawed data tells me to stay away.
ReplyDeleteWhile the balance sheet provides some perspective it doesn't really answer any questions about the company. I look for proof that the company is as good as it claims. The only way for me to do this is to look at the cash payment of dividends from the past.
No company is willing to part with their cash if they can avoid it. For those companies that have a dividend policy, you can quickly determine whether management has run their company in accordance with their promise to pay their investors.
Valueline is available online to members of the Sonoma Library system.
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