For students of Benjamin Graham and David Dodd, book value has an integral part to play in the evaluation of a company. Price to book value forms a vital part of the so-called 'Graham Number,' which is named after Benjamin Graham (who is widely considered to be the Godfather of value investing) and is used as a general test of trying to identify stocks that are currently selling at an attractive price.
Any stock price below the Graham number is considered undervalued and thus worth investing in. To qualify, shares must be trading at a price to earnings multiple of less than 15, and a price to book value of less than 1.5.
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Even though, to students of Graham...
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