Price-to-Book (P/B) Ratio

The price-to-book (P/B) ratio compares a stock's market price to its book value per share — total assets minus total liabilities, divided by shares outstanding. A P/B of 1.0× means you pay exactly the company's accounting net worth; above 1.0× reflects brand, goodwill, and growth expectations baked into the price.

P/B is most meaningful where the balance sheet is mostly mark-to-market financial assets — banks, insurers, and other financials — which is why it's a staple of bank valuation. For asset-light businesses (software, brands, services), book value badly understates economic worth because internally built intangibles aren't capitalized, so P/B routinely runs very high and tells you little.

A P/B below 1.0× can flag deep value — or a market betting that stated asset values are inflated and will be written down. Pair it with return on equity: a high-ROE business deserves a higher P/B, because it compounds book value faster.