1. What is Price to Book Ratio?

The Price to Book (P/B) ratio compares a company's market value to its book value. It indicates whether a stock is undervalued or overvalued by comparing the market price per share to the book value per share.

2. How Does the Calculator Work?

The calculator uses the P/B ratio formula:

Where:

• Market Price per Share — Current trading price of one share (USD)
• Book Value per Share — Company's total assets minus liabilities, divided by shares outstanding (USD)

Explanation: A P/B ratio under 1 typically indicates the stock may be undervalued, while a high P/B suggests overvaluation, though this varies by industry.

3. Importance of P/B Ratio

Details: The P/B ratio is particularly useful for valuing companies with significant tangible assets (like banks and manufacturers) and is often used alongside other valuation metrics.

4. Using the Calculator

Tips: Enter both market price and book value in USD per share. Both values must be positive numbers. The calculator will compute the unitless P/B ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good P/B ratio?
A: Generally, P/B under 1 may indicate undervaluation, but this varies by industry. Compare to industry averages for better context.

Q2: Why is P/B ratio important?
A: It helps investors identify potentially undervalued stocks and compare companies within the same industry.

Q3: What are limitations of P/B ratio?
A: Less useful for service companies with few tangible assets, and doesn't account for future earnings potential.

Q4: How often should P/B be calculated?
A: Regularly, as market prices fluctuate daily and book value changes quarterly with financial reporting.

Q5: Where can I find book value per share?
A: In a company's balance sheet (total equity divided by outstanding shares) or from financial data providers.