Price to Book Ratio
Tubopedia Mission
The price-to-book (P/B) ratio is a financial metric that compares a company's stock price to its book value. The book value is calculated as the value of a company's [assets minus its liabilities](/posts/Assets-and-Liabilities). The P/B ratio is calculated by dividing the current market price of a stock by its book value per share. A low P/B ratio may indicate that a stock is undervalued, as it suggests that the market is not placing a high value on the company's assets. A high P/B ratio, on the other hand, may indicate that a stock is overvalued, as it suggests that the market is placing a high value on the company's assets compared to their book value. It's important to note that the P/B ratio should be used in conjunction with other financial metrics and analysis of the company's fundamentals. A low P/B ratio alone does not necessarily mean that a stock is a good investment. For example, a low P/B ratio could be the result of poor financial performance or poor management. In addition, the P/B ratio can be affected by the accounting policies of the company. For instance, companies that use different accounting methods may have different book values, which can affect the P/B ratio. Value investors, such as [Warren Buffett](/posts/Warren-Buffet), often use P/B ratio as a metric to determine if a stock is undervalued. However, it is not a perfect metric and should be used in conjunction with other financial and qualitative analysis to gain a comprehensive understanding of the company's true value. ## Other Resources [Price To Book Explained](https://www.youtube.com/watch?v=VFYhdFhav2c)