Price-to-Book Ratio Calculator

The definition

The price-to-book ratio compares a company's market price to the accounting value of its net assets. Book value is shareholders' equity — total assets minus total liabilities — as recorded on the balance sheet. Dividing by shares outstanding gives book value per share, and dividing the stock price by that number gives the P/B ratio.

A P/B of 2.0× means the market values the company at twice the net assets on its books. Value investors have used this metric since Benjamin Graham because it anchors price to something tangible rather than to expectations about the future.

The formula

P/B Ratio = Current Price ÷ Book Value Per Share

Equivalently: Market Cap ÷ Total Shareholders' Equity.

Book value per share = total shareholders' equity ÷ diluted shares outstanding. Because equity is an accounting figure, P/B is most meaningful when the balance sheet reflects assets at close to their real value — as it does for banks, insurers, and asset-heavy businesses. Always read P/B alongside return on equity, which tells you how much profit the company generates on that book value.

Banks and financials

Banks, insurers, and REITs hold assets that are largely financial — loans, securities, and cash — marked at or near market value. That makes book value a reliable proxy for real net worth, so P/B is one of the best valuation tools for financials. A bank trading below 1.0× book is often a signal to investigate credit quality or return on equity.

Asset-heavy industrials

Manufacturers, utilities, shipping, and other capital-intensive businesses carry large tangible assets — plant, equipment, and property — on their balance sheets. For these companies, book value captures a meaningful share of the franchise's value, so P/B provides a useful floor and a sensible way to compare peers within the sector.

Value screening

P/B is a classic first-pass screen for value opportunities. Combined with return on equity, a low P/B and a high ROE can flag a company that is cheap relative to the returns it earns on its equity. It pairs naturally with the Graham Number and net-net (NCAV) approaches for building a margin-of-safety thesis.

Intangibles are not in book value

Brands, patents, software, and human capital rarely appear at their true value on the balance sheet. As a result, P/B systematically understates the value of asset-light companies. A software firm at 10× book may be cheaper than a manufacturer at 2× book once you account for what each actually owns and earns.

Accounting distortions

Book value is an accounting figure shaped by choices: goodwill from acquisitions, asset write-downs, depreciation schedules, and share buybacks that can even push equity negative. Two companies with identical economics can show very different book values, so always check what makes up the equity.

Negative book equity

Companies that have bought back large amounts of stock or accumulated losses can carry negative shareholders' equity, which produces a meaningless negative P/B. When book value is negative or near zero, the ratio breaks down entirely and other metrics must carry the analysis.

Sector variation

P/B norms differ enormously across sectors — from roughly 1.4× for banks to 8× or more for technology. A P/B is only meaningful relative to the right peer group, which is why this tool compares each stock to its sector median rather than to a single market-wide number. Learn more about how stock multiples work.