Price to Book Value Ratio

Track the current and historical P/B ratio, to find stocks that are under and over valued.

youtube-video-thumbnail
Note:

If you need help importing the indicator into ThinkOrSwim, here is a step-by-step tutorial which walks through the entire process.

Introduction

The Price-to-Book ratio is a common tool used by investors to evaluate a company's value. It is a simple calculation, that shares deeper insight into the fundamentals of a company.

In this tutorial, I'll show you how to plot the Price-to-Book Ratio (P/B) in ThinkOrSwim using a few linese of code. This opens up the ability to see how the P/B ratio has changed over time in a particular stock, and lets you find "extreme" zones. We will cover this and more in this tutorial.

We'll discuss how to:

  • Scan for stocks with a Price-to-Book ratio between 0 and 1.0
  • Write think script code to compare historical Price-to-Book ratios
  • Use other websites to streamline the process

Let's get started!

Volatility Box Invite

We are TOS Indicators.com, home of the Volatility Box.

The Volatility Box is our secret tool, to help us consistently profit from the market place. We’re a small team, and we spend hours every day, after the market close, doing nothing but studying thousands of data points to keep improving and perfecting the Volatility Box price ranges.

We have two different Volatility Boxes - a Futures Volatility Box and a Stock Volatility Box.

Futures Volatility Box - Trade Major Markets With an Edge

Designed For: Futures, Micro-Futures and Index Market Traders
Supported Models: Hourly Volatility Box models
Supported Markets: 10 Major Futures Markets

The Futures Volatility Box comes with:

  • 5 Volatility Models for each market
  • Support for 10 Futures Markets (/ES, /NQ, /YM, /RTY, /CL, /GC, /SI, /ZB, /HG, /NG)
  • Video Setup Guide
  • Trade Plan
  • Access to all members-only resources, including Squeeze Course

Learn More About the Futures Volatility Box

Trade futures and micro futures with a consistent volatility edge

Stock Volatility Box - Powerful Web Based Volatility Platform

Designed For: Stock and Options Traders
Supported Models: Hourly and Daily Volatility Box models
Supported Markets: 10,000+ Stocks and ETFs (new markets added frequently)

A Stock Volatility Box membership includes access to: 

  • Live Scanner - A powerful scanner we've built from scratch, to scan 10,000 symbols every 2 seconds for new volatility breaches
  • Dashboard - A quick and easy way to view daily volatility model levels online
  • Short Interest Scanner - Short interest, Squeeze, and EMA data to find short squeezes
  • Squeeze Course - All of our proprietary squeeze tools, including robust backtesters
  • All Members Only Indicators - We don't nickel and dime you. Everything really is included.
  • And much more!

Learn More About the Stock Volatility Box

Trade stocks and options with a consistent volatility edge

Scan for Stocks With Price-to-Book Ratio Filters

In this section, we will walk you through the steps to use the scan tab in ThinkOrSwim to identify stocks with a Price-to-Book ratio between 0 and 1.0. We'll discuss things like the importance of liquidity filters, option watchlists, etc.

Follow along with our step by step guide to learn how to use thinkorswim to scan for stocks with a low Price-to-Book ratio.

  1. Open the scan tab in ThinkOrSwim and remove any existing filters.
  2. Select the group of stocks you would like to scan. For example, you might select the "All Optionable" list under the "Category" dropdown.
  3. Add a liquidity filter to the scan. This can be done by selecting "Add Filter" and then selecting "Study" from the dropdown list. From there, select "Volume" and then "Average Volume." Set the filter to require the average volume of the stock over the past 50 days to be at least 1 million shares.
  4. Add a fundamental filter to focus on the Price-to-Book ratio. Select "Fundamental" from the dropdown list and then select "Price-to-Book value ratio" from the options. Set the minimum value to be greater than zero and the maximum value to be less than 1.0.
  5. Run the scan to generate a list of stocks that meet these criteria. You can sort the list by volume to see the stocks with the highest trading volume at the top.

Adding liquidity filters to the scan is important because it ensures that the resulting stocks are tradable and have options.

This is crucial for finding potential opportunities in the market using the Price-to-Book ratio.

By only including liquid stocks in the scan, you can be confident that the stocks you are analyzing are worth further research and can be easily traded if you decide to invest.

 

Building a Price-To-Book Ratio Indicator in ThinkOrSwim

To build a Price-to-Book ratio indicator in ThinkOrSwim, follow these steps:

  1. Open the indicator tab in thinkorswim and click on "Create."
  2. Define the two variables needed to calculate the Price-to-Book ratio: price and book value. The closing price can be tracked using the "close" keyword, and the book value can be accessed using the "bookvalue" keyword and the "bookvalueperShare" function. For example:
    def current = close;
    def BookValue = BookValuePerShare(getSymbol(), FiscalPeriod.Year);
  3. Calculate the Price-to-Book ratio by dividing the closing price by the book value. Assign this value to a new variable called "pb_ratio."
    plot pb_ratio = current/BookValue;
  4. To compare the current Price-to-Book ratio to its historical values, you can use websites like Yahoo Finance or koyfin to find the current ratio. You can then compare this value to the plot on the chart to see if the current ratio is significantly different from the historical values.
  5. Plot a horizontal line at 1, if you'd like a threshold.
    plot one = 1;

Once you have written the code, click on "OK" to save it and apply it to the chart. The Price-to-Book ratio will now be plotted on the chart along with the stock price, allowing you to compare the current ratio to its historical values and identify potential opportunities.

 

Other Helpful Resources

In this section, we will introduce other websites that can be used to quickly find and compare a stock's Price-to-Book ratio to its historical values. These websites can be a useful alternative to writing custom code in ThinkOrSwim, as they can provide easy access to current and historical Price-to-Book ratio data.

1. Yahoo Finance

One website that can be used for this purpose is Yahoo Finance.

This site provides current and historical financial data for a wide range of stocks, including the Price-to-Book ratio. To find the current Price-to-Book ratio for a stock on Yahoo Finance, simply search for the stock and then click on the "Key Statistics" tab. The current Price-to-Book ratio will be listed under "Valuation Measures."

2. Koyfin

Another website that can be used to find and compare a stock's Price-to-Book ratio is Koyfin.

This is a free financial data and analysis platform that provides current and historical Price-to-Book ratio data for a wide range of stocks. To find the current Price-to-Book ratio for a stock on koyfin, simply search for the stock and then click on the "Valuation" tab. The current Price-to-Book ratio will be displayed in the "PB" column.

One advantage of using these websites to find and compare a stock's Price-to-Book ratio is that it can save time and effort compared to writing custom code in ThinkOrSwim.

However, one potential disadvantage is that these websites may not always provide historical data, allowing you to see current in relation to past data. This is where the edge comes in, when analyzing the price to book ratio in ThinkOrSwim vs. other websites.

 

Conclusion

In conclusion, the Price-to-Book ratio is a valuable tool for identifying potential opportunities in the stock market. By using the scan tab in ThinkOrSwim and custom thinkScript code, you can easily find stocks with a low Price-to-Book ratio and compare their current ratio to its historical values.

Websites like Yahoo Finance and Koyfin can also be useful for quickly finding a stock's current Price-to-Book ratio.

Some key takeaways from this tutorial include:

  • The Price-to-Book Ratio is a useful tool for identifying undervalued stocks
  • The scan tab in ThinkOrSwim can be used to quickly find stocks with a low Price-to-Book ratio
  • Custom thinkScript code can be used to calculate and plot the Price-to-Book ratio on a chart
  • Websites like Yahoo Finance and Koyfin can provide easy access to current and historical Price-to-Book ratio data

By following the steps and using the tools outlined in this tutorial, you can gain a better understanding of a stock's valuation and find potential opportunities in the stock market.

I encourage you to try out this tutorial and experiment with the thinkScript code to find your own opportunities using the Price-to-Book ratio.

Take care everyone, and good luck trading!

Table of Contents
    Add a header to begin generating the table of contents

    Trade Like a Pro, With the Pros

    Trade Like a Pro, With the Pros

    Institutional models, for the retail trader