4 Big Bank Stocks That Trade Below Book Value
When picking a stock to buy, one of the first things an investor should look at is valuation. With bank stocks in particular, this means looking at the price-to-book-value ratio.
This is a metric that compares how much a bank claims to be worth on its balance sheet (on a per-share basis) to how much investors think it's worth, which is reflected in the bank's share price. To calculate the price-to-book-value ratio, you divide a bank's share price by its book value per share. A bank stock that trades for more than book value is said to trade at a premium; one that trades for less than book value is said to trade at a discount.
The average bank stock on the KBW Bank Index, which tracks the shares of two dozen large-cap banks, trades for 1.5 times book value, according to YCharts.com. Getting a little more granular, 20 of the 24 stocks on the index trade at a premium to book value. The remaining four, listed in the table below, are priced below book value:
Source: Fool.com