Chapter 2 and the web page to that chapter warn about trading on P/B ratios: There’s something missing. One “something missing” piece was the rate of return on book value, ROE and the chapter 2 web page goes on to explain how ROE betters the screen. But it then said that was incomplete. Now that you have been introduced to the residual earnings model, you understand why: It’s not just ROE but future ROE, the growth, and that charge against future ROE with a hurdle (discount) rate. In more direct terms, it is discounted expected future residual income and its growth. Comparing this measure of value, V, to price in a V/P ratio challenges the P/B ratio.
So, have investors done this? Yes, many times. Papers that report that investing with V/P ratios is a profitable strategy are in Your Library for chapter 3. A more recent paper adds to this. See
Bergen, D., F. Franzoni, D. Obrycki, and Resendes. 2024. Intrinsic Value: A Solution to the Declining Performance of Value Strategies. At https://ssrn.com/abstract=4913068.
Now, to get to a V, these papers must insert a hurdle rate, r, and a growth rate, g. That is quite speculative. Chapter 4 leads us to a better way to go.