GlossaryP/B Ratio

P/B Ratio

P/B

Share price compared to a company's net asset value.

The price-to-book ratio divides share price by book value per share — assets minus liabilities, per share. It's most useful for asset-heavy businesses like banks, insurers, and REITs, where book value closely tracks intrinsic worth.

The formula

Price per ShareBook Value per Share
= P/B Ratio

Why it matters

  • Below 1.0× means the market values the company at less than its net assets — sometimes a bargain, sometimes a warning.
  • Less useful for asset-light businesses (software, services) where most value is intangible and off the balance sheet.
  • A classic input for value-investing screens alongside P/E.

How to read it

< 1.0×Trading below net asset value
1.0×–3.0×Typical for most industries
> 3.0×Market values intangibles or growth well above book

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