P/B Ratio: Price to Book

The P/B ratio compares a stock's market price to its book value (assets minus liabilities). A P/B below 1 means the stock trades below the value of its net assets.

The Formula

P/B Ratio = Stock Price ÷ Book Value per Share

Interpretation

• <1.0: Trading below asset value - potential deep value
• 1.0-3.0: Normal range for most companies
• >3.0: Premium - significant intangible value expected

Sector Considerations

Banks and financials rely heavily on P/B. Tech companies often have high P/B due to intangible assets not reflected in book value.