What are you paying versus the company’s net assets? Enter the share price and book value per share — or total equity and share count — to get the price-to-book (P/B) ratio that value investors live by.
Or compute book value per share from the balance sheet:
Answer first: the price-to-book ratio compares a stock’s market price to its book value — the net assets (assets minus liabilities) that would theoretically remain if the company were wound up. A P/B of 1.0 means you are paying exactly what the accountants say the equity is worth; above 1.0 you pay a premium for the brand, growth or profitability the balance sheet doesn’t capture.
P/B = Share price ÷ Book value per share, where book value per share = Shareholder equity ÷ Shares outstanding.
Example: a $45 stock with $30 of book value per share has a P/B of 1.5 — you pay $1.50 for every $1 of net assets.
| P/B ratio | Rough interpretation |
|---|---|
| Under 1.0 | Trading below net assets — possible bargain or a warning sign |
| 1.0 – 3.0 | Typical range for many established companies |
| Above 3.0 | A premium — common for asset-light, high-return businesses |
Price-to-book shines for asset-heavy businesses — banks, insurers, industrials and REITs — where the balance sheet genuinely reflects what the company owns. Benjamin Graham, the father of value investing and Warren Buffett’s teacher, leaned heavily on book value to find “net-net” bargains. It works poorly for asset-light firms like software or consumer brands, whose real value lives in intangibles (code, patents, reputation) that barely register on the books, producing sky-high P/B ratios that aren’t actually expensive.
A stock below book value can be a genuine bargain — or a “value trap” where the market correctly expects the assets to lose value or the company to keep losing money. Always ask why it is cheap. Pair P/B with return on equity (ROE): a low P/B plus a healthy ROE is far more attractive than a low P/B on a business that destroys capital.
Reality check: book value uses historical accounting costs, not current market values, and ignores intangibles — so P/B can mislead badly for tech and brand-driven companies. Educational tool only — verify equity figures on the balance sheet via SEC EDGAR. Not financial advice.
Combine with the P/E ratio, EPS and market cap calculators, and read growth vs value investing.
Last updated 27 June 2026 · Written by Mustafa Bilgic. Educational only — not financial advice.
Divide the share price by the book value per share. Book value per share equals total shareholder equity divided by shares outstanding. A $45 stock with $30 book value per share has a P/B of 1.5.
Value investors often look for a P/B under 1.0 to 3.0, but it varies hugely by industry. Asset-heavy banks and industrials trade near book value, while asset-light tech firms can trade at many times book without being overpriced.
It means the stock trades for less than its accounting net assets. That can signal an undervalued company or a value trap where the market expects further losses or asset write-downs. Investigate the reason before buying.
Book value is based on tangible assets recorded at historical cost. Software and brand companies derive most of their value from intangibles like code, patents and reputation, which barely appear on the balance sheet, inflating their P/B.