McKesson Corp. (NYSE:MCK)

The financial data indicates a general expansion in the market valuation of the company relative to its book value between 2005 and 2016. While the book value per share grew steadily over the decade, the share price experienced more significant volatility and overall higher growth, leading to a substantial increase in the Price to Book Value (P/BV) ratio, which peaked in 2015 before correcting in 2016.

Book Value per Share (BVPS) Trend

A consistent upward trajectory is observed in the book value per share, rising from 17.58 US$ in 2005 to 39.66 US$ in 2016. This represents a steady increase in the net asset value attributable to each share, with only a minor contraction observed between 2014 and 2015, where the value decreased from 36.96 US$ to 34.55 US$.

P/BV Ratio Volatility and Growth

The P/BV ratio demonstrates three distinct phases. First, a period of moderate growth occurred from 2005 to 2007, with the ratio moving from 2.14 to 2.83. Second, a sharp contraction is evident in 2009, where the ratio dropped to 1.67, coinciding with a significant decline in share price. Third, a period of aggressive expansion took place between 2010 and 2015, during which the ratio climbed from 2.43 to a peak of 6.64.

Valuation Correction

A notable correction occurred in 2016, where the P/BV ratio declined from 6.64 to 4.35. This decrease was driven by a reduction in the share price from 229.55 US$ to 172.70 US$, occurring despite a simultaneous increase in the book value per share to its period high of 39.66 US$.

Relationship Between Share Price and Book Value

The divergence between share price growth and book value growth is most pronounced between 2013 and 2015. During this interval, the share price more than doubled, rising from 108.63 US$ to 229.55 US$, while the BVPS increased at a much slower rate. This disparity resulted in the P/BV ratio reaching its highest recorded level, suggesting a period of significant market premium over the company's accounting value.