Compare a stock's price with the accounting value of what shareholders own. Enter the share price and book value per share, or let the calculator work out BVPS from equity and shares outstanding, to get the P/B ratio, tangible P/B and the price implied by an industry multiple.
Last updated:
Calculate from
$
$
Common equity ÷ shares outstanding.
$
$
From the balance sheet (total assets − total liabilities).
$
Subtracted to get common equity.
$
For tangible book value and price-to-tangible-book.
Comparison (optional)
×
Gives an implied price at that multiple.
%
Shows P/B ÷ ROE and the implied earnings yield.
Enter your values to see the result.
Advertisement
Advertisement
How to use the Price to Book Ratio Calculator
Choose your inputs: price and BVPS if you already know book value per share, the balance sheet to compute it, or company totals (market cap and equity).
Enter the share price and equity figures. Use total shareholders' equity from the latest balance sheet and subtract any preferred stock.
Add goodwill and intangibles (optional) to see the stricter price-to-tangible-book ratio.
Enter an industry P/B (optional) to get the implied share price, and ROE to see the implied earnings yield.
Read the results, then check the multiples table or copy the summary.
Price-to-book formulas
Book value per share (BVPS) = (total shareholders' equity − preferred equity) ÷ common shares outstanding
P/B ratio = share price ÷ BVPS = market capitalization ÷ common equity
Worked example: a company reports total equity of $2.0 billion, including $200 million of preferred stock, and has 100 million shares outstanding.
Common equity is $1.8 billion, so BVPS = $1.8 billion ÷ 100 million = $18.00. At a share price of $45, P/B = 45 ÷ 18 = 2.5×, a 150% premium to book.
If the company carries $300 million of goodwill and intangibles, tangible BVPS is $15.00 and the price-to-tangible-book ratio is 3.0×.
How to read the P/B ratio
P/B range
What it usually means
Where you often see it
Below 1×
Market values the company below its net assets; possible bargain or expected losses / write-downs
Struggling banks, cyclical industrials at a trough, holding companies
1× – 2×
Moderate premium; returns on equity roughly in line with the cost of capital
Banks, insurers, utilities, many industrials
2× – 5×
Investors expect returns on equity clearly above the cost of capital
Consumer staples, healthcare, quality industrials
Above 5×
Much of the value sits in intangibles (brands, software, patents) or equity is shrunk by buybacks
These ranges are rough guides, not rules. Always compare a company with direct competitors and with its own history.
Tips for using P/B
Use common equity. Preferred stock belongs to preferred holders, so remove it before dividing by common shares.
Pair P/B with ROE. A low P/B with a low ROE is often fair value, not a bargain. A high P/B can be justified by a consistently high ROE.
Watch buybacks and write-offs. Large share repurchases or accumulated losses shrink book value and can push P/B very high or negative.
Use the latest balance sheet. Book value comes from the most recent quarterly or annual report; the price should be current.
Frequently asked questions
How do you calculate the price-to-book ratio?
P/B ratio = share price ÷ book value per share. Book value per share is (total shareholders' equity − preferred equity) ÷ common shares outstanding. At company level the same ratio is market capitalization ÷ common shareholders' equity. A $45 stock with BVPS of $18 has a P/B of 2.5.
What is a good price-to-book ratio?
It depends on the industry. Banks, insurers and other asset-heavy businesses often trade near 1×, because their assets are mostly financial and carried close to market value. Software and consumer brands can trade at 5× or more because much of their value (brands, code, people) is not on the balance sheet. Compare a company with its peers and its own history.
What does a P/B below 1 mean?
The market values the company at less than its accounting net worth. That can signal an undervalued stock, but it often reflects doubts about asset values, weak returns on equity, expected losses or write-downs. Check whether the company earns a return on equity above its cost of capital before treating it as a bargain.
What is price-to-tangible-book value?
Tangible book value removes goodwill and other intangible assets from equity, because those assets usually cannot be sold separately and may be written down. P/TBV = price ÷ tangible book value per share. It is widely used for banks and for companies that have made large acquisitions.
How are P/B and ROE related?
Return on equity is net income ÷ book equity, so P/B ÷ ROE equals P/E. A company with a P/B of 2 and ROE of 12% has an implied P/E of about 16.7 and an earnings yield of about 6%. High-ROE companies generally deserve higher P/B ratios.
Why is P/B not useful for some companies?
When book value is negative or very small, for example after large buybacks or years of losses, P/B is meaningless or huge. Asset-light companies also have little book value relative to their earning power. For those, the P/E, price-to-sales or EV/EBITDA multiples are usually more informative.
Is market-to-book the same as price-to-book?
Yes. Market-to-book ratio is another name for P/B. Its inverse, book-to-market (book value ÷ market value), is used in academic value-factor research, where high book-to-market stocks are classified as value stocks.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.