— Stock Market
Price-to-Book Ratio Calculator
Calculate price-to-book from stock price and book value per share, or market cap and total equity. Add intangibles to get price-to-tangible-book and compare market value with the company’s accounting net worth.
P/B ratio
1.5
- Book value per share
- $20
Try: Price $30, book $20/share, Below book: $8 price, $10 book, Tangible book & ROE, Cap $3B, equity $2B
— How it works
P/B = share price ÷ book value per share = market capitalization ÷ total equity. Book value per share = total equity ÷ shares outstanding. Tangible book = equity − intangibles − goodwill; price-to-tangible-book uses that in place of equity.
Price against net worth
Book value is what the accountants say the company is worth: total assets minus total liabilities, the shareholders’ equity. The P/B ratio divides the market price by that figure — per share, or in aggregate as market cap ÷ equity. A P/B of 1 means the market values the company at exactly its book value; above 1, at a premium; below 1, at a discount. It’s the metric Benjamin Graham built value investing around, and it works even for companies with no earnings, since equity is almost always positive.
Worked example — a $30 share price on $20 of book value per share: P/B = 30 ÷ 20 = 1.5. The market values the company at one and a half times its accounting net worth. At $8 on $10 of book, the P/B is 0.8 — trading below book.
Below book: value or trap?
A P/B under 1 is the headline value signal — you’re paying less than the company’s net assets are carried at. Sometimes that’s a genuine bargain the market has overlooked; often it’s a warning that those assets are worth less than the balance sheet claims, or that the company is destroying value. The distinction matters. One clue is tangible book value, which strips out intangibles and goodwill — accounting entries that may not survive a bad year. Price-to-tangible-book is the stricter test: a stock cheap on P/B but expensive on tangible book is leaning on soft assets.
P/B only makes sense with ROE
A low P/B isn’t automatically cheap, and a high one isn’t automatically dear — it depends on profitability. A company earning a high return on equity deserves to trade above book, because it compounds that equity quickly; one earning little should trade near or below it. The “justified” P/B here divides ROE by your required return, a no-growth fair value — a 15% ROE against a 10% required return justifies a P/B of 1.5. P/B also suits asset-heavy businesses (banks, insurers, industrials) far better than asset-light ones (software, services), where book value barely captures the real worth. Compare within an industry, and read P/B alongside ROE. Not investment advice.
— Reader questions
How do I calculate the price-to-book ratio?
Divide the share price by the book value per share, or the market cap by total equity. A $30 price on $20 of book value per share gives a P/B of 1.5. Book value per share is total equity divided by shares outstanding.
What does a P/B below 1 mean?
The stock trades below its book value — you’re paying less than the accounting net worth of the company. It can signal an undervalued bargain or a market warning that the assets are impaired or the business is in decline. Tangible book and ROE help tell which.
What is price-to-tangible-book?
The same ratio but using tangible book value — equity with intangibles and goodwill removed. It’s a stricter, more conservative measure, since intangibles can be written off. A stock cheap on P/B but dear on tangible book relies on soft assets.
How are P/B and ROE related?
Profitability justifies the multiple: a high return on equity supports a higher P/B because the company compounds its book value faster. A simple no-growth “justified” P/B is ROE ÷ required return — a 15% ROE against a 10% cost of equity justifies a P/B of 1.5.
When is the P/B ratio most useful?
For asset-heavy businesses — banks, insurers, REITs, industrials — where book value closely reflects real worth. It’s far less useful for asset-light companies like software or services, whose value lies in intangibles the balance sheet barely records.