Total Assets to Market Capitalization Ratio
factor.formula
Asset-to-Market Ratio:
This formula calculates the asset-to-market ratio, with the numerator being the company's total assets at the end of the most recent reporting period and the denominator being the company's total market value at the same point in time.
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The total assets of a company at the end of the most recent reporting period, including both current and non-current assets. Total assets can usually be found in the company's financial statements. It is important to note that the accounting book value is used here, not the market value.
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The total market value of a company at a given point in time, calculated by multiplying the current price of the company's stock by the total number of shares outstanding. The total market value reflects the market's assessment of the company's overall value.
factor.explanation
The asset-to-market ratio is a commonly used indicator to measure company valuation. A higher asset-to-market ratio (i.e., total assets are higher relative to total market value) usually indicates that the company's stock may be undervalued by the market, because the company has large-scale assets but has not received corresponding market valuations; conversely, a lower asset-to-market ratio (i.e., total assets are lower relative to total market value) usually indicates that the company's stock may be overvalued by the market. This factor is similar to the book-to-market ratio, but using total assets instead of book equity can more comprehensively assess the company's value. It should be noted that the effectiveness of the asset-to-market ratio depends on the company's specific industry and business model. Companies in different industries have large differences in their asset structures, so it is not very meaningful to directly compare this indicator between different industries.