Price to Book Ratio Calculator
Category: Fundamental & Economic ToolsAnalyze company valuations relative to their book value, compare against industry standards, and identify potentially undervalued or overvalued stocks
Stock Information
Book Value Information
P/B Ratio Analysis Results
P/B Ratio by Industry Sector
P/B to ROE Analysis
Valuation Scenarios
Fair Value Analysis
Fair value estimate based on current book value and sector average P/B ratio.
ROE-Adjusted Value
Analysis based on P/B ratio justified by the company's Return on Equity (ROE).
Growth-Based Value
Future valuation based on projected growth in book value and current P/B ratio.
Valuation Insights
Current Valuation
With a P/B ratio of 3.00, this stock is trading above the Technology sector average of 2.50. This suggests the stock may be slightly overvalued based on its book value.
ROE Analysis
The company's Return on Equity (ROE) of 12% is above the sector average. This partially justifies the premium P/B ratio, as companies with higher ROE typically trade at higher multiples.
Tangible Book Value Assessment
The price-to-tangible-book ratio of 3.60 is higher than the standard P/B ratio. This indicates that 16.7% of the book value consists of intangible assets, which may present moderate risk if these assets need to be written down.
Future Outlook
With projected earnings growth of 8% and a current ROE of 12%, the stock shows reasonable growth potential. Investors should monitor changes in ROE and book value trends in future financial reports.
Understanding Price-to-Book Ratio
The Price-to-Book (P/B) ratio compares a company's market value to its book value. It shows how much investors are willing to pay for each dollar of net assets. This metric is particularly useful for valuing financial institutions, manufacturing companies, and businesses with significant tangible assets.
Types of Book Value
- Standard Book Value: Total assets minus total liabilities (shareholders' equity)
- Tangible Book Value: Standard book value minus intangible assets (goodwill, patents, etc.)
- Book Value Per Share (BVPS): Total shareholders' equity divided by outstanding shares
- Tangible Book Value Per Share (TBVPS): Tangible book value divided by outstanding shares
Interpreting P/B Values
- P/B < 1: Stock potentially undervalued, trading below net asset value
- P/B = 1: Market value equals book value (rare except in distressed situations)
- P/B > 1: Market values company above its stated net assets
- High P/B: Often indicates high ROE, strong growth prospects, or understated assets
- Low P/B: May indicate poor returns, declining business, or overstated assets
P/B Ratio Formulas
Standard P/B Ratio
Price-to-Tangible-Book Ratio
ROE-Justified P/B
Book Value Per Share
Limitations of P/B Analysis
- Accounting Practices: Book value can be affected by different accounting methods and policies
- Asset Composition: Less relevant for service or technology companies with few tangible assets
- Hidden Assets/Liabilities: May not capture off-balance sheet items or intellectual property value
- Historical Cost: Assets recorded at historical cost may differ significantly from current market values
- Sector Variation: P/B ratios vary widely across sectors, making cross-industry comparisons difficult
What this calculates
Price-to-book — market value against balance-sheet net assets.
- Formula
P/B = share price ÷ book value per share- Worked example
- A 120 HKD share with book value of 80 HKD per share trades at a P/B of 1.5.
- When to use it
- Most useful for banks and asset-heavy businesses, where book value means something.
- Common mistake
- Book value ignores intangibles. A software company can trade at 20× book and still be cheap; the ratio simply does not describe it.