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Showing content with the highest reputation on 12/26/2025 in Posts
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It’s a shorthand way to calculate the relationship between ROE and P/B taught to me by another investor. I think it builds in some margin of safety when the ROE is high and probably means paying fair value when the ROE is low. The actual relationship should be exponential especially with a low payout ratio as the retained capital is compounded at a higher rate.1 point