PB-ROE Model | The Investment Quadrant by The Fifth Person

Questions › Category: Miscellaneous › PB-ROE Model

Jieren Zheng asked 5 years ago

Hi Guys,
Have you guys heard of the PB-ROE model?
Heard of it recently, wondering what’s your thoughts about it.
Kinda seems like earnings yield somewhat.

2 Answers

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Victor Chng answered 5 years ago

Hi Jieren,
I have not hear before this model. Can you point me to the link so I can go read what it is about?

Jieren Zheng replied 5 years ago

Hi Victor,

Some links:
http://value-edge.com/2016/05/16/introducing-pb-roe-the-combined-asset-earnings-valuation-framework/
https://seekingalpha.com/article/40398-pb-roe-analysis-a-very-useful-tool
https://seekingalpha.com/article/2557745-the-relationship-between-roe-p-b-and-p-e-as-seen-in-at-and-t
http://www.northinfo.com/documents/29.pdf

Have a look :)

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Victor Chng answered 5 years ago

Hi Jieren,

The ratio is just to gauge the quality of the company. I think it is most suitable to use for deep value company. If you want to use value growth you can use the same thing except it is PE-ROE ratio

Jieren Zheng replied 5 years ago

Yea, I was thinking of playing around with the multiples but I was also thinking whether the output really means anything or not ^^”

Looks like earnings yield or low PE could more or less do it as well.

Victor Chng replied 5 years ago

I think the ratio is to measure in term of quality instead of cheapness. Sometime cheap does not mean good but quality at reasonable price may be a good bet

Jieren Zheng replied 5 years ago

Ah. Thanks for the insight!