MV/BV ratio. The higher the better or vice a versa ?

Hi all,

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

A_s 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?


Why would you rather pay $4.30 for each dollar of equity, rather than paying only $3.20 for each dollar of equity?

Put another way, if you invest $1.00, why would you rather get only $0.23 in equity instead of getting $0.31 in equity?

Right, makes sense. Thanks!

You’re welcome.