The price-to-book ratio compares what the market pays for a share with the company’s net assets on the balance sheet per share. A ratio below one can mean the market values the firm at less than its accounting equity, but it can also signal weak assets or poor prospects. Banks and asset-heavy businesses are often judged with P/B alongside other measures.
Key takeaways
- P/B links market price to book equity per share.
- Low P/B is not automatically a bargain; assets may be overstated or earnings poor.
- Intangible-heavy firms can look expensive on P/B even when healthy.
- Use it with return on equity and asset quality, not alone.