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Chevron Corporation Message Board

  • varia_nada varia_nada May 18, 2011 4:42 PM Flag

    IS BOOK VALUA MATTER OR PE MORE IMPORTANT?

    First time bought cvx a few months ago at around $94. Had a bad experience with energy mutual fund .(invest 25k in 1997, out 29k in 2011). Have heard cvx is a good stock. Is it a concern that book value only 57? Or pe is better to judge it's fair value? Tx for your thought.

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    • I worked at a manufacturing facility for a few years first in cost accounting and later in property accounting. The experience gave me insight about book value that I didn't get in school. The assets of a company are not in any way an accurate picture for determining the market value is the bottom line. You have factors including depreciation based on estimates which often don't account for useful life accurately or obsolescence. In bankruptcy most the machinery is virtually worthless for a variety of reasons. The real reason book value is not a useful measure of a company's worth is it has almost no relation to the profitability of a business. Many companies with high book value are not profitable (As once were the railroads) and many like MSFT that once had very high profitability with an exceptionally low book value. WW

 
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