People normally use return on equity ROE to judge the attractiveness of a business. Return on equity can be calculated from using net profit from income statement divided by equity in balance sheet. The value normally can be found in the media such as newspaper, magazine, and research report. Warren Buffet use 15% as a general guideline to judge between whether a business is attractive or not.
Here, I would like to do a little modification and introduce "specific return on equity", sROE.
Equity can also be defined as book value, which mean the value business owner will get if the business is going to closed down and liquidated. Theory wise, if the price to book, P/B, or price to equity, is 1, you buy into the book value and earn the return same as the original business owner's return on equity, ROE. However, normally you don't get to buy the exact price to book value of 1. You will buy at 0.8, 1.4, 2 etc depend on the market quoted price at the time. The equity value now you are buying into is not the same with the equity value in the balance sheet. Your specific equity value should be adjusted by multiplying the equity value of balance sheet with the price to book you are buying into.
To simplify that, your specific return on equity should be ROE divided by the price to book value you bought the share. You will get higher ROE than the business ROE if you buy below price to book value of 1. If you buy at more than 1 price to book value, the return on equity you get will be less than the business ROE.
The use shall be used in the acquisition of business, but also can be used as a guideline in general investment.
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