Price-to-Book Ratio (P/B): formula and how to read it

What you pay for each dollar of net worth on the books. Share price divided by book value per share (shareholders' equity per share, from the latest reported balance sheet). Calculated for banks and insurers too, whose value is mostly on their balance sheets. A company that owes more than it owns has negative book value: it shows as Negative book value and ranks below every company with positive book value (smaller shortfalls first), and it never passes a P/B filter.

Stock Meadow groups it under Valuation, and shows it in tables as P/B.

P/B = share price ÷ book value per share (shareholders' equity per share, from the latest reported balance sheet)

A stock trading at $30 with book value of $20 per share has a P/B of 1.5. The numbers are made up for illustration.

A lower P/B means you pay less for each dollar of net assets. A P/B below 1 means the shares trade below book value, which the market may be pricing for weak returns or doubtful assets.

When Stock Meadow ranks stocks, a lower figure scores better.

• Book value leaves out many valuable assets such as brands and software, so asset-light companies often show high P/B ratios.
• Buybacks and big losses can shrink book value, even to a negative number. Stock Meadow shows Negative book value and ranks it below every company with positive book value.
• Accounting values can differ from market values, particularly for older assets.

How Stock Meadow handles gaps. Usually blank when book value per share isn't available. A negative figure shows as Negative book value, ranks below every positive figure and never passes a filter.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Fixed-recipe models that score it: Trending Value (O'Shaughnessy).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

• Return on Equity (ROE): profit made on shareholders' money.
• P/E Ratio (Price-to-Earnings): what you pay for each dollar of profit.
• Price-to-Sales Ratio (P/S): what you pay for each dollar of sales.

What does a price-to-book ratio below 1 mean?

The shares trade below the accounting value of the company's net assets. That can be a bargain, or a sign the market doubts the assets or expects poor returns. Check profitability and asset quality before drawing a conclusion.

Is price-to-book useful for banks?

Yes. A bank's value is mostly on its balance sheet, so P/B is a common starting point. Stock Meadow calculates it for banks and insurers.

Is a higher or lower P/B better?

When Stock Meadow ranks stocks, a lower figure scores better. That is a ranking convention, so read P/B alongside other measures and compare similar companies.

Why is P/B blank for some stocks?

It is usually blank when book value per share isn't available. Stock Meadow leaves the figure blank rather than guessing it.