Three decades ago, the average big company had a stock market value equal to what accountants figured the company s assets would fetch in a sale (book value), plus a smidgen more. Today, the average company sells for about double its book value. There are two likely reasons for the shift. First, the rise of companies like eBay (EBAY) and Google (GOOG), which earn large sums without factories, fleets or even shops, suggests part of the increase in the market s price/book ratio is deserved. Second, while stock valuations today are well below their peak levels during the three years ended 2007 P/B ratios averaged 2.8 shares still aren t cheap. (For more on why, see Why Stocks Are Way Too Pricey

Book value remains a useful measure for finding stock bargains. In a 2000 study, University of Chicago professor Joseph Piotroski presented an investment strategy based largely on low P/B ratios that backtesting showed doubled the market s yearly returns over two decades ended 1996. I recently ran a search for companies trading at or below their book values. I favored ones that pay dividends and threw out ones that owe too much or that aren t profitable. I also excluded banks, since I don t quite trust the accounting value of their loan portfolios at the moment. That is, the value of today s loans depends on the likelihood of borrowers making their payments in the future, which depends on some things that seem especially difficult to forecast right now, like the unemployment rate, house prices and stock prices.

Below are three companies my search produced.

Time Warner

Price/book: 0.9
Dividend yield: 2.7%

The diversified media giant, with interests in cable television, magazines, film, and dial-up Internet service, was formed by a ludicrously expensive 2000 merger between America Online and Time Warner that valued the company at more than $350 billion. Today it trades for less than a tenth of that. Media businesses of all sorts are struggling to make money, while remaining dial-up Internet customers are slowly moving on to broadband or the afterlife. This year, companywide sales for Time Warner (TWX) are expected to plunge by nearly a third. That said, there are early signs that shareholders can expect better days. The company is widely expected to spin off AOL later this year, allowing it to focus on tweaking parts of its business that are working (HBO, CNN, Warner Brothers) and fixing ones that aren t (publishing). More than $7 billion in cash on the balance sheet bodes well for share repurchases and dividends. And shares sell for less than 14 times this year s cratered earnings forecast. Even a modest recovery in advertising rates could send them well higher.

Tidewater

Price/book: 1.0
Dividend yield: 2.3%

Tidewater (TDW) is the world's largest supplier of service ships to offshore energy companies, with a fleet of 393. With oil prices down from their highs, and drillers more selective about new projects, the business has hit a lull. Tidewater s profits are expected to fall from nearly $8 a share in its last fiscal year (ended March) to less than $6 a share this year, and $5 next year. But shares trade at just eight times this last figure, and Tidewater has negligible debt and a decent dividend. One bright spot about a downturn in the marine services business: It makes ships less expensive. That gives a well-financed company like Tidewater the opportunity to improve its fleet on the cheap and wait for boom times to return.

Portland General Electric

Price/book: 1.0
Dividend yield: 5.2%

The electric power business is often thought of as being recession-proof. It s not, since even though homeowners aren t likely to turn out the lights to save money, some industrial customers cut back on hours, idle plants or even fold. Accordingly, Portland General Electric (POR) is expected to see sales slip 3% this year. Meanwhile, power outages cut into second-quarter profits. Shares seem adequately discounted for the bad news, at 14 times this year s earnings forecast, and more important, they come with a 5.2% dividend yield. While early forecasts for next year s earnings surely amount to more guessing than science, analysts foresee a 25% recovery from this year s depressed earnings.