What is Price-to-Book (P/B) Ratio?
A stock's price divided by its book value per share.
Formal Definition
The Price-to-Book (P/B) ratio compares market price to book value per share, where book value is total assets minus liabilities. It is a classic value metric, most useful for asset-heavy firms and banks. A P/B below 1.0 means the market values the company below its accounting net worth, which can signal a bargain or distress.
In Simple Terms
It compares a stock's price to the net worth on its books, the value of what it owns minus what it owes. A low ratio can mean you are buying assets cheaply, though it can also flag trouble.
Example
A bank trading at $40 with book value of $50 per share has a P/B of 0.8, valuing it below its stated net worth.