There are many ways to value a company. One of the most conservative ways is to take the value of a company’s assets and subtract its liabilities. What’s left over is the company’s book value.

Of course, the value of a company’s assets and liabilities are often subject to estimates by management and can include hard-to-measure intangibles like goodwill, patents and intellectual property. But if you strip out intangible assets and focus just on hard assets, and subtract the liabilities, you’re left with the more conservative tangible book value.

Essentially, this is the what’s left over for shareholders if a company were to liquidate all of its assets and pay off all of its obligations.

Catch-22

So how much are you willing to pay for a company’s net assets? This usually depends on a how well the company is doing. Typically companies with strong returns on equity (ROE) and thus growing book values trade at high multiples to their book value.

Apple (AAPL – Analyst Report), for instance, trades at 5.7x tangible book value. But the company generated a whopping 41% return on equity over the last twelve months.

S&P In-Line with Historical Standards

Currently the median price to tangible book value multiple for the S&P is 6.1, which is in-line with its 10-year median. And its trailing twelve month ROE of 15.5% is also near its 10-year median.

But if you look hard enough, there are some great values out there.

4 Cheap Stocks

Theoretically a company shouldn’t trade below its tangible book value. But I’ve found 4 that are currently doing just that, while also maintaining a solid ROE.

Many of these companies are in struggling industries right now, so they are not for the faint of heart. But keep in mind that if these companies were to cease operations today, sell off all of their tangible assets and pay off all of their liabilities, what’s left over would be worth more than their current stock price, assuming the value of those assets aren’t overstated on the balance sheet.