Where does book value fit part 2
I just wanted to add Another quick thought I had to my previous blog about where book value it's into the equation
If you just care about earnings and not book value, imagine u had a company with no growth. You probably wouldn't buy this company but bare with me. They have a book value of 10, earnings of 2 a year, and a price of 20. If they never pay a dividend and instead retain earnings, in order to maintain a constant p/e of 10, the stock will never go higher If you don't factor I book value because they will always earn 2. After 500 years they've earned 1000 in cash. You're going to tell me the company is still worth the same thing it was before it had 1000 per share of retained earnings, as it was after it retained all those earnings? Impossible. I just don't really know where to fit it in to the equation
Also conversely, does p/e matter at all for banks, or only book value?