What is PD/DD & How to calculate it?

First of all, market capitalization is the value found by multiplying the total capital of the company by the share price. In other words, if a company has a capital of 20 million TL and its share price is 2 TL, its market capitalization is 40 million TL. Book value is the difference between the company's  operating resources and liabilities on the balance sheet and is equal to the company's equity.

PD/DD = Market capitalization / Equity

The market value to book value ratio, or PD/DD, is one of the important ratios we look at when analyzing balance sheets. By looking at the ratio between these two values, we can interpret whether the company is cheap or expensive. Generally, companies with a low PD/DD value are considered cheap, while those with a high value being considered expensive. However, this ratio is not always interpreted in this way. PD/DD value alone is not a strong indicator, and deciding whether it is expensive or cheap by looking at this ratio alone may mislead you. When looking at the PD/DD ratio, it is also necessary to look at the sector's PD/DD ratio and return on equity. While the company's return on equity is high, it is not a problem if the PD/DD value is above the base value of 1. The company's return on equity can be found by using the PD/DD value and the F/K ratio. Of these two ratios, which are important in financial valuation, the return on equity, which is an important indicator for companies, is found by dividing the PD/DD ratio by the F/K ratio.

Market value to book value ratio / Price to earnings ratio = Profit / Equity

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