ATLASPrice-to-book ratio (P/B)
Investing glossary · Valuation and fundamentals
The share price divided by the book value of equity per share: what investors pay for each unit of accounting net worth.
Definition
The price-to-book ratio (P/B) divides the share price by the book value per share, which is the company's assets minus its liabilities, divided by the number of shares. A P/B of 1 means the market values the company at exactly its accounting net worth; above 1, investors pay a premium for earning power the balance sheet does not show.
P/B is most useful for businesses whose assets are mostly financial, such as banks and insurers. It is much less useful for asset-light companies like software firms, whose most valuable assets, brands, code and people, are not on the balance sheet. It is tied to profitability: a company that earns a high return on its equity deserves a higher P/B.
Formula
P/B = price per share ÷ book value per share = P/E × ROE
Book value per share = (total assets − total liabilities) ÷ shares. The identity P/B = P/E × ROE follows because ROE = EPS ÷ book value per share.
Worked example
JPMorgan Chase & Co. (JPM) has a P/E of 13.8 and a return on equity of 17.8%. Multiplying them gives an implied price-to-book of about 2.46, which means a book value of roughly $136.50 per share against a price of $336.08.
The same P/B can be cheap for a company with a high ROE and expensive for one with a low ROE; always read the two together.
How ATLAS uses it
ATLAS does not show P/B as a headline number, but the stock page gives the P/E and the return on equity, from which you can derive it, and valuation by peer multiples uses these ratios.
Related in ATLAS: Financials →Browse all ATLAS tools →See it on a real stock
The example above uses these companies. Open their pages for the full numbers:
Frequently asked questions
Is a P/B below 1 a bargain?
Not automatically. It may mean the market doubts the value of the assets or expects low returns on them. It is a reason to investigate the quality of the balance sheet, not a buy signal.
Why is P/B less useful for tech companies?
Because their main assets, software, brands, data and talent, are mostly not recorded on the balance sheet, so book value understates what the business really holds.
Related terms
Put the idea to work on your own stocks
Open any company in ATLAS to see its fair value, its odds of rising and its risk numbers side by side.
Try ATLAS →Not investment advice. ATLAS estimates are produced by statistical models from public data; they can be wrong and past performance does not predict future results. Consider your own situation before investing. Disclaimer