Back to Glossary
Price-to-Book Ratio (P/B)
Valuation & Fundamentals
A company's market capitalization divided by its shareholders' equity, or book value.
It shows how many times the net assets on the company's books the market is willing to pay. It is most meaningful for businesses whose assets are largely financial, such as banks; for companies whose value sits mostly in brands, intellectual property and people, such as software firms, the ratio naturally runs high.
Example
A company with a market cap of $50 billion and shareholders' equity of $25 billion has a P/B of 2.
Related Terms
3 Links
More in the Guide