Are these ASX All Ords shares ready to buy at fundamentally fire sale prices?

Among the 500 ASX All Ords shares, 110 are trading below their book value.

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Key points

  • There are 110 ASX All Ords shares trading below their book value today, data reveals 
  • A company's book value is calculated by subtracting the value of its liabilities from the value of its assets
  • The price-to-book (P/B) ratio is the share price divided by the book value per share

ASX All Ords Index (ASX: XAO) shares are in the red today, down 0.5% in afternoon trading.

There are 500 companies comprising the ASX All Ords shares index.

Of those, 110 are trading below their book value, and some of them are trading at fire sale prices.

Let us explain.

What is book value?

A company's book value reflects how much it is worth, according to its financial statements

It's calculated by subtracting the value of a company's liabilities from the value of its assets.

The price-to-book (P/B) ratio is the share price today divided by the book value per share.

You determine the book value per share by dividing the book value by the number of shares on issue. 

Say you've got an ASX All Ords company trading at $13 per share and its book value is $10. You divide 13 by 10 to get a P/B ratio of 1.3.

A P/B ratio of 1 indicates the ASX All Ords share is trading at fair value. Anything above 1 indicates the share is expensive in relation to its intrinsic worth. Below 1 indicates the share is relatively cheap.

Of course, many other factors determine the individual value of ASX All Ords shares.

Some of them are quantifiable, such as growing profits. Others are intangible, such as investor sentiment.

If ASX investors feel hopeful about a share, they will bid up the price. And vice versa.

As investors, we need to consider a range of factors to help us decide what we are happy to pay for the ASX All Ords shares we are interested in.

This is called fundamental analysis, which involves looking at a wide range of financial metrics to get a good overall picture of a company's health and its future prospects.  

But we all need a starting point for our research.

After all, among ASX All Ords shares, we've got 500 companies to choose from! So, we need to separate them out somehow to determine which ones deserve a detailed investigation.

How to identify ASX All Ords shares trading below book value

Screening programs are terrific tools for achieving this task. Using them is far less time-consuming than calculating the book value of scores of ASX All Ords shares manually.

They are available through most brokerage platforms, and are accessible for free on some investing websites, too.

You can enter a few data points into a screening program, like a P/B ratio under 1 to ensure you don't overpay for a share, or a market capitalisation above $2 billion if you want to avoid small-cap shares.

The screening program will then create a list of ASX All Ords shares that meet those criteria.

You can also find the book value for a share on your existing share trading platform.

Go to the share's information page and look for a tab or link to financial information. Some sites show historical data, so you can see how the book value of an ASX share has changed over time. Helpful!

A consistently rising book value is always a good sign.

Which ASX All Ords shares are trading at fire sale prices?

S&P Global Market Intelligence data shows there is a mixed bag of ASX All Ords shares trading below their book value today.

Dominating those 110 shares are real estate investment trusts (REITs) and other ASX property shares.

The absolute standout is Unibail-Rodamco-Westfield CDI (ASX: URW) with a P/B ratio of 0.374.

It's a European multinational commercial real estate company that specialises in shopping centres.

Here are other examples of ASX All Ords shares with a P/B ratio below 1 (from lowest to highest):

  • Cromwell Property Group (ASX: CMW) shares (with a P/B ratio of 0.595)
  • Centuria Office REIT (ASX: COF) shares (0.606)
  • Charter Hall Long WALE REIT (ASX: CLW) shares (0.693)
  • GPT Group (ASX: GPT) shares (0.724)
  • Centuria Industrial REIT (ASX: CIP) shares (0.744)
  • Charter Hall Retail REIT (ASX: CQR) shares (0.758)
  • HomeCo Daily Needs REIT (ASX: HDN) shares (0.779)
  • Scentre Group (ASX: SCG) shares (0.786).

There are also several ASX financial shares, including ASX bank shares, trading below book value.

Examples include:

What do the experts say about these ASX All Ords shares?

Let's take a look at a few recent broker ratings on these ASX All Ords shares.

Ord Minnett upgraded its rating on AMP shares to 'accumulate' with a 12-month share price target of $1.35. The AMP share price is currently $1.10, implying a potential upside of 23%.

Citi has a buy rating and a $5 price target on the Charter Hall Long WALE REIT. The share is currently $4.25, so there's no huge upside expected in terms of growth. However, for dividend-focused investors, this share looks attractive, with Citi tipping dividend yields of 6.6% in FY23 and 6.85% in FY24.

UBS has a sell rating on Bendigo Bank shares with an $8 price target. This implies a 10% downside with the Bendigo Bank share price currently trading at $8.80.

Morgans has downgraded Bank of Queensland shares from an add rating to a hold rating. The team slashed their 12-month share price target on Bank of Queensland stock from $11 to $6.75. Ouch.

ASX All Ords shares are up 5.9% in the year to date and down 4% over the past 12 months.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank. The Motley Fool Australia has recommended Humm Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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