Price to book value (market cap/Book value) is actually a metric of:
PE x ROE which is equal to :
(price/earnings) x (earnings / equity) where equity = net book value (asset-libailbities)
therefore another way to write this is:
(ROE – g) / (r – g)
where g is the growth rate and r is the cost of equity/required rate of return.
If we assume a zero ...