Educational purposes only. This content does not constitute investment advice. Read our disclaimer
StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A ratio comparing a stock's market price to its book value (assets minus liabilities per share). Shows how much you're paying for the company's net assets.
Why It Matters
P/B ratio is a classic value investing metric. A P/B below 1.0 means you're buying the company for less than its net assets are worth on paper — potentially a bargain. Banks and financial companies are often valued on P/B because their assets (loans, securities) are already marked to market. Tech companies usually have high P/B ratios because their main assets (intellectual property, brand) don't appear on the balance sheet.
Key Points
- Calculate it: Stock Price ÷ Book Value Per Share
- P/B below 1.0 can signal a bargain — or a company in serious trouble
- Most useful for asset-heavy industries (banks, real estate, manufacturing); less useful for tech
Related Terms
Common Questions
A ratio comparing a stock's market price to its book value (assets minus liabilities per share). Shows how much you're paying for the company's net assets. P/B ratio is a classic value investing metric. A P/B below 1.
P/B ratio is a classic value investing metric. A P/B below 1.0 means you're buying the company for less than its net assets are worth on paper — potentially a bargain. Banks and financial companies are often valued on P/B because their assets (loans, securities) are already marked to market. Tech companies usually have high P/B ratios because their main assets (intellectual property, brand) don't appear on the balance sheet.
Calculate it: Stock Price ÷ Book Value Per Share
P/B below 1.0 can signal a bargain — or a company in serious trouble
Most useful for asset-heavy industries (banks, real estate, manufacturing); less useful for tech