From the share price and book value per share, compute the price-to-book (P/B) ratio to gauge whether a stock trades above or below its book value.
Input Data
Results
At a glance:The P/B ratio is the share price divided by book value per share, measuring how much the market pays per dollar of book equity.
Formula
priceToBook = sharePrice / bookValuePerShare
How to Use
- Enter the share price.
- Enter the book value per share.
- Read the P/B ratio.
FAQ
Does a P/B below 1 mean the stock is cheap?
Not necessarily. P/B below 1 means the price is below book value — in theory you buy the company for less than its net assets, which may be undervalued. But the market often has reasons: sustained losses, poor asset quality, a dim outlook, or hard-to-realise assets. That can be a 'value trap'. Judge with profitability (ROE), asset quality and prospects, not just a low P/B.
Which industries suit a P/B valuation?
P/B fits industries where assets are reliably measured and value sits on the balance sheet — banks, insurance, property, shipping and investment holding companies. Their assets (loans, property, fleets, portfolios) have clear book values. By contrast, light-asset, high-intangible firms (tech, brands, consulting) carry much real value (talent, patents, brand) off the balance sheet, so P/B is less useful — prefer P/E or P/S.
Why read P/B together with ROE?
P/B and ROE are linked: a firm that sustains a high ROE deserves a higher P/B (the market pays a premium for efficient assets), while a high P/B with low ROE may be overvalued. A useful frame: high ROE + reasonable P/B is attractive; high P/B but low ROE is a warning; low P/B + low ROE may be a value trap. Together they show whether the valuation matches the earning power.
How is P/B different from the P/E ratio?
The denominator differs: P/E uses earnings per share (profitability), P/B uses book value per share (assets). P/E is closest to the shareholder's ultimate return but swings with one year's earnings and fails when a company loses money (negative); P/B is more stable, computable even in loss, and less distorted by one-off items, so it suits asset-heavy and cyclical firms. In practice they complement: P/E for the earnings side, P/B for the asset side, both with ROE.
Is the book value reliable — what to watch?
Book value is an accounting figure and may not equal true market value. Points to note: property, plant and equipment are often at historical cost, so market value can far exceed book (making P/B look high and the stock actually cheaper); goodwill and intangibles swing with acquisitions and impairments; and light-asset, high-intangible firms keep most real value off the balance sheet, so their P/B is barely meaningful. When reading P/B, understand the asset mix and the gap between book and real value; never look at the number alone.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.