What is Price-to-Book Ratio (P/B)?
P/B compares the market value of a company to its book value (shareholders' equity). It's most useful for asset-heavy businesses like banks, insurers, and real-estate trusts where the balance sheet is the core driver of value. A P/B under 1 may indicate undervaluation — or, conversely, that the market expects future losses.
Formula
P/B = Share Price ÷ Book Value Per Share
How TopTier Strategy uses Price-to-Book Ratio (P/B)
P/B is a core Valuation pillar input for financials and asset-heavy sectors. For software and services, where intangibles dominate, we weight it less heavily.
Related Glossary Terms
Other concepts in the Valuation pillar.
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