This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Tangible (Book Value) Results

NEW YORK ( TheStreet) -- One year ago, I revealed a list of seven companies -- Corning (GLW), Hess (HES), Rowan (RDC), Patterson-UTI (PTEN), Omega Protein (OME), Kelly Services (KELYA) and American Greetings, a company bought out in August -- that were trading below tangible book value per share.

That measure takes the more commonly used book value per share calculation (shareholders equity divided by shares outstanding), and strips out intangible assets such as goodwill, patents and trademarks. The theory here is that intangible assets can have little real value and may skew a company's true book value; it's simply a more conservative view of book value and is often used by the value crowd.

That group of companies has returned an average of 50% since that column ran, versus 28% for the S&P 500 and 38% for the Russell 2000. Rather than simply screening for companies trading below tangible book, the screen I use for this search includes several other criteria:
  • No financial companies
  • Long-term debt to equity less than 50%
  • Companies must be profitable on a trailing 12-month basis
  • Minimum market cap $100 million
Five of the qualifying companies returned more than 50%. Corning, Hess, Patterson, and Kelly were all in the 50% range, while fish oil and fish meal producer Omega Protein more than doubled. The two laggards were Rowan, up 16%, and American Greetings, up 14%. In August, American Greetings was taken private by the Weiss family, who already had controlling interest in the company.

While I am pleased with the results of this screen, I know they occurred in an up market, and the real test is performance when the markets are pulling back. The theory is that tangible book value can create a potential floor value in a stock price; that the price should not deviate too far below tangible book value. Of course, companies in distress can and will deviate from that theory.

In order to avoid such situations, I have included a couple of criteria in my screen -- profitability on a trailing 12-month basis, and debt to equity ratio below 50% -- that should help guard against the inclusion of troubled companies.

Despite the run-ups in stock prices, the six remaining publicly traded companies now trade at an average of 1.23 times tangible book value per share, still on the low side. Rowan is the only remaining company trading below tangible book value.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%
YHOO $36.58 -1.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs