Valuation ratio

P/B Ratio (Price-to-Book)

The price-to-book (P/B) ratio compares a stock's market price to its book value — the net value of the company's assets on its balance sheet. It shows how much investors pay for each unit of accounting net worth, and is especially useful for asset-heavy businesses like banks and industrials.

Formula

P/B = Price per Share / Book Value per Share

How to interpret it

A P/B below 1 means the market values the company at less than its stated net assets, which can signal undervaluation — or that the market doubts those asset values. A high P/B suggests investors expect strong returns on those assets. Norms vary widely by industry.

Example

If a stock trades at $30 and its book value per share is $20, the P/B is 30 / 20 = 1.5 — investors pay 1.5 times accounting net worth. A bank trading below 1.0 P/B is priced below its stated equity.

Common uses

Find asset-heavy companies (banks, industrials) trading below or near their book value.
Use P/B below 1 as a starting point to investigate possible deep-value opportunities.
Compare P/B with ROE — a high ROE can justify a higher P/B, a low ROE cannot.
Screen within capital-intensive sectors where book value is a meaningful anchor.

Limitations

Book value reflects historical accounting, not current market or intangible value, so P/B understates asset-light companies (software, brands) and can mislead when assets are stale or impaired.
It says nothing about profitability on its own.

In Fin Screener

Fin Screener displays the P/B ratio for each stock and includes it among the screening filters, useful for spotting potentially undervalued asset-heavy companies.

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