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Metric · Valuation

Price-to-Book Ratio (P/B) Explained

The price-to-book ratio (P/B) relates a stock's price to its book value per share. It shows how much investors are currently paying for each euro of book equity.

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Updated 20266 min read
Formula
P/B = Share price ÷ Book value per share
< 1.5Attractive valuation
1.5–3.0Moderate valuation
> 3.0High valuation
Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator
Share price
The stock's current market price.
Denominator
Book value per share
Book equity divided by the number of shares outstanding.

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Result P/B
Moderate valuation
2.0
1
A P/B below 1.5 can point to an attractive valuation relative to book value (a classic value-investing signal).
2
A P/B above 3.0 usually prices in intangible value such as brand, patents or growth expectations that aren't on the balance sheet.
3
For financials (banks, insurers) P/B is traditionally especially meaningful, since their balance sheet consists largely of measurable financial assets.

Used in these strategies

Graham Net-NetsStocks below liquidation value: the hardest form of value investing.Magic Formula: Value + QualityGood companies at cheap prices: two factors, one score.

Frequently asked questions

As a rough guideline, a P/B below 1.5 counts as attractive and above 3.0 as high. What matters most is always the industry comparison and the share of intangible assets in the business model.
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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.

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