Price-to-Book Ratio (P/B)
The Price-to-Book (P/B) ratio compares a stock's market price to its book value per share (assets minus liabilities on the balance sheet). It is a relative stock valuation metric favored by Graham-style value investors.
Formula
Example
A bank stock trading at $45 with a book value per share of $30 has a P/B of 1.5x. Historically, stocks trading below 1x book value have attracted deep-value investors, though book value is less meaningful for asset-light technology companies in stock valuation.
Why It Matters
P/B is particularly relevant in stock valuation for financial companies, real estate, and asset-heavy industries where tangible assets dominate. It complements DCF analysis as a sanity check — a very low P/B may signal undervaluation or distress.
How MiniValuator Uses Price-to-Book Ratio (P/B)
While MiniValuator primarily uses DCF for stock valuation, P/B is referenced as a relative benchmark alongside other multiples to provide context for the DCF-derived intrinsic value.
See It in Action
- How the PE model estimates fair value
- Financial Services sector fair value analysis
- Energy sector fair value analysis
Related Terms
- Intrinsic Value — Intrinsic value is the estimated true worth of an asset based on its fundamental economic characteri...
- Enterprise Value (EV) — Enterprise Value (EV) represents the total value of a company to all capital providers (equity holde...
- Discounted Cash Flow (DCF) — Discounted Cash Flow (DCF) is a fundamental stock valuation methodology that estimates the present v...
- Book Value — Book value is the net asset value of a company as recorded on its balance sheet — total assets minus...
Ready to apply this concept? Try the MiniValuator DCF Calculator — calculate intrinsic value for any US stock in under 60 seconds.