Definition
Price-to-Book ratio compares a company's market value to its book value (assets minus liabilities). A P/B below 1 may indicate the stock is undervalued or the company has problems. It's most useful for asset-heavy industries like banking and manufacturing.
Formula
P/B Ratio = Market Price Per Share / Book Value Per Share
Example
If a stock trades at $30 and book value per share is $20, the P/B is 1.5x. Banks typically trade at P/B of 1-2x, while tech companies may trade at 5-10x due to intangible assets.
FAQ
What is P/B Ratio (Price-to-Book)?
A valuation ratio comparing stock price to book value per share.
How do you calculate P/B Ratio (Price-to-Book)?
A common formula for P/B Ratio (Price-to-Book) is: P/B Ratio = Market Price Per Share / Book Value Per Share
Why is P/B Ratio (Price-to-Book) important?
P/B Ratio (Price-to-Book) helps investors evaluate valuation and make more informed decisions.