MV/BV ratio. The higher the better or vice a versa ?
I got confused why the MV/BV ratio with the lower quotient is deemed to have a better value. Below is the excerpt from Reading 33 (CFA Institute book).
Marseglia computes the MV/BV for the companies as follows:
SCHW $21,871/$5,073 = 4.3
AMTD $11,525/$3,551 = 3.2
As expected, each company appears to be selling at a premium to the industry average MV/BV of 1.2. The companies have similar MV/BVs (i.e., they are somewhat equally valued relative to the book value of shareholders’ equity), but based solely on MV/BV, AMTD appears to be a better value. Marseglia is concerned, however, because he notes that AMTD has significant amounts of goodwill and acquired intangible assets.
Could someone explain me why SCHW does not have a better value?
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