I've been recently looking at companies with low P/B to find something undervalued for further analysis. (I obviously know that not all companies with low P/B are undervalued and a lot of great buys has high price to book.)
I've been thinking about adjusting book value to leave some margin of safety when determining value of the company. Basing on Benjamin Graham's formula for net net I came up with the following formula:
Adjusted book value: Cash & cash equivalents + Receivables x 0.9 + Other assets (current & non-current) x 0.6 – Total liabilities
What do you think about such formula? May it be helpful to find truly undervalued stocks (when it comes to asset heavy companies e.g. in steel, shipping or automotive industry)?
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