P/B — Price-to-Book Ratio
DeepScreen explains P/B as follows: P/B compares market value with accounting net assets. It is most useful for banks and asset-heavy companies and less useful for software or brands whose assets are not fully recorded.
Formula
Share price ÷ book value per share
Illustrative example
A share price of 60 divided by book value per share of 30 gives P/B of 2x. Check whether the recorded assets need impairment.
Educational example; these are not reported company figures.
How to interpret it
- Below 1 means the market values equity below stated book value.
- A premium can be justified by high, durable returns on equity.
Limitations
- Book values can contain impaired or low-quality assets.
- Cross-sector comparisons are misleading.
Frequently asked questions
- What is P/B?
- P/B compares market value with accounting net assets. It is most useful for banks and asset-heavy companies and less useful for software or brands whose assets are not fully recorded.
- How is P/B calculated?
- Share price ÷ book value per share
- What should investors watch for with P/B?
- Book values can contain impaired or low-quality assets. Cross-sector comparisons are misleading.
. Educational analytical content, not investment advice.