Miano Marseglia is an analyst who is evaluating the relative valuation of two securities brokerage companies: TD Ameritrade Holding Corporation (NasdaqGS: AMTD) and the Charles Schwab Corporation (NYSE: SCHW). As one part of an overall analysis, Marseglia would like to see how the two companies compare with each other and with the industry based on market value to book value. Because both companies are large players in the industry, Marseglia expects them to sell at a higher MV/BV than the industry median of 1.2. He collects the following data on the two companies.

Marseglia computes the MV/BV for the companies as follows:

As expected, each company appears to be selling at a premium to the industry average MV/BV of 1.2. The companies have similar MV/BVs (i.e., they are somewhat equally valued relative to the book value of shareholders’ equity), but based solely on MV/BV, AMTD appears to be a better value. Marseglia is concerned, however, because he notes that AMTD has significant amounts of goodwill and acquired intangible assets. He wonders what the relative value would be if the MV/BV were computed after adjusting book value, first, to remove goodwill and, second, to remove all intangible assets. Book value reduced by all intangible assets (including goodwill) is known as “tangible book value.” The median price/tangible book value for the industry is 1.3.
1. Compute the MV/BV adjusted for goodwill and the price/tangible book value for each company.
2. Which company appears to be a better value based solely on this data? (Note that the MV/BV is only one part of a broader analysis. Much more evidence related to the valuations and the comparability of the companies would be required to reach a conclusion about whether one company is a better value.)

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Market capitalization on January 2010 (market price per share times the number of shares outstanding) Total shareholders' equity as of most recent quarter Goodwill Other intangible assets SCHW $21,871 $5,073 $528 $23 AMTD $11,525 $3,551 $2,472 $1,225