3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

The price-to-book value (P/BV) ratio is a financial metric that compares a company’s market price per share to its book value per share, which is the value of the company’s assets minus its liabilities, divided by the number of outstanding shares. The P/BV ratio provides insights into how the market values a company relative to its accounting value or net asset value. This analysis (see Figure 5) identified a much higher P/BV by Tesla suggesting that the investors expect a higher growth rate in the future. VW was negatively affected by Dieselgate in 2016 and maintains very low values indicating negative investor’s sentiment, Toyota Motor Corporation again keeps this metric stable over time. P/BV ratios below 1 (the case of Volkswagen Group) indicate negative market sentiment and suggest that investors do not anticipate the full realization of value from past investments.

Figure 5: Price to book value of selected companies in the last ten years

Source: Authors’ calculations based on Macrotrends (2024a, 2024b, 2024c) and Companiesmarketcap (2023)

The price-to-earnings (P/E) ratio compares a company’s current market price per share to its earnings per share (EPS). It is calculated by dividing the market price per share by the earnings per share. By examining the P/E ratios of Volkswagen Group, Tesla, and Toyota Motor Corporation over the past decade (see Figure 6), this analysis shows how Tesla converges slowly to the industry levels whereas Toyota Motor Corporation and Volkswagen Group keep relatively stable. The unprecedentedly high P/E ratios Tesla reached in 2020 and 2021 in graphical representations cause the P/E of Toyota Motor Corporation and Volkswagen Group to appear negligible. However, in reality, the P/E ratios achieved by both companies fundamentally correspond to values empirically commonly reached in established and relatively stable sectors (over the last five years, the stocks of Volkswagen Group and Toyota Motor Corporation have been trading at 7 – 11 times the EPS).

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