Boom-Era Valuations Are Creating Fake Stock Bargains

If there's one thing investors have (hopefully) learned in the past two-plus years, it is that lower prices don't necessarily mean bargains. To the simple price of stocks and (relatively) low price-to-earnings ratios, you can add price-to-book value to the list of metrics that are down from the peak, but shouldn't automatically be assumed to be attractive.

Book value is the net sum of a company's assets minus its liabilities, or the value at which assets are carried on corporations' balance sheets. A simpler way to look at is this: If you sold off a company's assets and paid off its liabilities, the amount left over would be its book value.

Whatever definition you prefer, the fact is that more than 30 companies in the S&P 500 were trading with price-to-book value (P/B) of less than 1 as of Wednesday. (A sample of these appear in the tables below.) A lot of these companies appear to be bargains, but aren't, because their book values still carry puffed-up, boom-era valuations. ...