Price-to-Book Ratio#
Price-to-Book Ratio#
Price-to-Book Ratio (P/B Ratio): This is a financial metric that compares a company’s market value (stock price) to its book value (net asset value), calculated as:
\[\text{P/B Ratio} = \frac{\text{Market Price per Share}}{\text{Book Value per Share}}\]
Market Price per Share is the current trading price of the company’s stock.
Book Value per Share is the value of the company’s assets minus liabilities, divided by the number of shares outstanding.
A P/B ratio below 1 suggests that the stock may be undervalued, meaning the market values the company less than its actual net assets. Conversely, a P/B ratio above 1 may indicate the market is valuing the company at a premium.