Price-To-Book Ratio - P/B Ratio

Loading the player...

DEFINITION of 'Price-To-Book Ratio - P/B Ratio'

Price to book ratio (P/B Ratio) is a ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.

Also known as the "price-equity ratio".

Calculated as:
Price-To-Book Ratio (P/B Ratio)

BREAKING DOWN 'Price-To-Book Ratio - P/B Ratio'

A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. As with most ratios, be aware that this varies by industry.

This ratio also gives some idea of whether you're paying too much for what would be left if the company went bankrupt immediately.

For more, check out Digging Into Book Value

RELATED TERMS
  1. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  4. Impaired Asset

    A company's asset that is worth less on the market than the value ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding ...
  6. Carrying Value

    An accounting measure of value, where the value of an asset or ...
Related Articles
  1. Stock Analysis

    The Top 5 Oil and Gas Stocks for 2016 (XOM, BP)

    Read detailed analyses of the top five oil and gas stocks, and learn why they may be poised to rise in 2016 after a dismal 2015.
  2. Stock Analysis

    The Top 5 Entertainment Penny Stocks for 2016 (SIRI, ZNGA)

    Learn more about what types of businesses comprise the entertainment industry, and discover five entertainment penny stocks for investors to consider in 2016.
  3. Stock Analysis

    Tech Stocks Vs. Financial Stocks in 2016

    Consider the arguments for allocating more of your investment portfolio to either the technology sector or the financial sector for 2016.
  4. Stock Analysis

    5 Penny Stocks to Watch in 2016 (ZIXI, AMRS)

    Discover five of the most promising penny stocks that investors may wish to consider adding to their investment portfolios during 2016.
  5. Stock Analysis

    The Top 5 Health Care Penny Stocks for 2016 (CRIS, GERN)

    Discover why the health care industry is a good play for investors and learn key information about the top five health care penny stocks for 2016.
  6. Stock Analysis

    The Top 5 Small Cap Bank Stocks for 2016 (SFNC, HBHC)

    Find out more about the top five small-cap bank stocks for 2016, and learn why they are expected to rise after the Fed's interest rate hike.
  7. Stock Analysis

    The Top 4 Small-Cap Oil Stocks for 2016 (ALDW, ALJ)

    Discover detailed analyses of the top four oil stocks in 2016, and learn about their fundamentals and why they may be poised to rise.
  8. Stock Analysis

    The Top 4 Mid-Cap Oil Stocks for 2016 (PBF, HFC)

    Explore detailed analyses of the top four oil-related stocks for 2016, and learn about the characteristics of these stocks and why they may be poised to rise.
  9. Mutual Funds & ETFs

    VBR: Vanguard Small-Cap Value ETF

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  10. Stock Analysis

    The Top 5 Small Cap Silver Stocks for 2016 (TAHO, CDE)

    Take a look at five of the most promising small-cap silver mining stocks that investors might want to consider as growth or value investments in 2016.
RELATED FAQS
  1. What is the average price-to-book ratio of companies in the retail sector?

    The retail sector includes seven types of retail companies: automotive; building supply; distributors; general; grocery and ... Read Full Answer >>
  2. What is the average price-to-book ratio for companies in the telecommunications sector?

    The telecommunications sector consists of various subsectors, including wireless communication and fixed-line voice and data. ... Read Full Answer >>
  3. What is the average price-to-book ratio in the utilities sector?

    As of June 17, 2015, the average price-to-book (P/B) ratio of the utilities sector is 2.82. This sector includes diversified, ... Read Full Answer >>
  4. What metrics can be used to analyze a telecommunications company if they have very ...

    Telecommunications companies play a very crucial role in the economy by providing access to voice, text, video and other ... Read Full Answer >>
  5. What is the average price-to-book ratio in the aerospace sector?

    Aerospace companies under the industrial goods sector scope could provide value-investing opportunities to investors. However, ... Read Full Answer >>
  6. What is the difference between Book Value Of Equity Per Share (BVPS) and book value ...

    There is no difference between book value of equity per share (BVPS) and book value over equity. The equation for a company's ... Read Full Answer >>
  7. What is the average price-to-book ratio for companies in the automotive sector?

    The automotive sector provides its investors with value-investing opportunities. It includes auto dealerships, auto parts ... Read Full Answer >>
  8. Why would a value investor include an allocation to the airline sector?

    It's reasonable for a value investor to include some asset allocation to the airline industry for two main reasons. First, ... Read Full Answer >>
  9. Why is the P/E ratio a better metric than book-to-market ratio analysis?

    There is no clear-cut best alternative to the book-to-market ratio; valuation methods vary in effectiveness based on the ... Read Full Answer >>
  10. What is the average price-to-book ratio of companies in the Internet sector?

    The average price-to-book ratio (P/B) of companies in the Internet sector is 4.965 for 2014 and 4.43 for Q1 of 2015, according ... Read Full Answer >>
  11. What is the average price-to-book ratio for companies in the drugs sector?

    Companies in the drug manufacturers - major industry sector are included under the health-care sector. Investors could use ... Read Full Answer >>
  12. What are some examples of overhead treatment in cost accounting?

    The chemicals sector offers an attractive addition to an investor's portfolio, offering reasonable returns on investments. ... Read Full Answer >>
  13. What is the average price-to-book ratio in the insurance sector?

    The insurance sector could be an attractive option for an investor interested in diversifying his portfolio with a financial ... Read Full Answer >>
  14. What metrics are commonly used to evaluate companies in the internet sector?

    The metrics commonly used to evaluate companies in the Internet sector are user growth, sales growth and gross margin. The ... Read Full Answer >>
  15. Is the banking sector a good choice for value investing?

    The banking sector is a good choice for value investing. Value investors look for stocks in which the market price does not ... Read Full Answer >>
  16. What is the average price-to-book ratio for a bank?

    The average price to book ratio (P/B) for banking firms, as of January 2015, is approximately 1.1. The P/B ratio is an evaluation ... Read Full Answer >>
  17. How should I analyze a company's financial statements?

    Investors should take advantage of the wealth of information provided in a company's financial statements to help them evaluate ... Read Full Answer >>
  18. What other investment metrics are best used in conjunction with net margin?

    Some of the metrics that are best used in conjunction with net margin include the operating profit margin, the price to book ... Read Full Answer >>
  19. What is a typical price-to-book ratio in the financial services sector?

    The financial services sector is divided into three main categories: banks, insurance companies and investment firms. Within ... Read Full Answer >>
  20. Why would a value investor be drawn to the financial services sector?

    A value investor is drawn to investing in the financial services sector for two principal reasons. First, financial service ... Read Full Answer >>
  21. What metrics can be used to evaluate companies in the financial services sector?

    Two of the best metrics that can be used to evaluate companies in the financial services sector are the price-to-book (P/B) ... Read Full Answer >>
  22. If the intrinsic value of a stock is significantly lower than the market price, should ...

    Though a stock with a significantly lower intrinsic value than current market price may indicate the stock is overvalued, ... Read Full Answer >>
  23. What is the average price-to-book ratio in the railroads sector?

    Railroads generally have solid price-to-book, or P/B, ratios a bit above the 2.0 level; these levels are considered "good" ... Read Full Answer >>
  24. What is considered a good PEG (price to earnings growth) ratio?

    The price/earnings to growth, or PEG, ratio is a very useful stock valuation measure investors and analysts can use to get ... Read Full Answer >>
  25. What is the average price-to-book ratio in the oil & gas drilling sector?

    Oil and gas drilling companies under the purview of energy sector stocks can provide attractive value investing opportunities ... Read Full Answer >>
  26. If a company has a low price to book ratio, does this mean its stock is undervalued?

    A low price-to-book ratio, or P/B ratio, is an indication a stock may be undervalued, but because of all the variables involved, ... Read Full Answer >>
  27. Does a high price to book ratio correspond to a high ROE?

    A high price to book (P/B) ratio doesn't necessarily correspond to a high return on equity (ROE), but it does under ideal ... Read Full Answer >>
  28. What is considered a good price to book ratio?

    It is difficult to pinpoint a specific numeric value and definitively declare it a "good" price-to-book (P/B) ratio, in terms ... Read Full Answer >>
  29. What's the difference between book and market value?

    Book value is the price paid for a particular asset. This price never changes so long as you own the asset. On the other ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center