What is price to book value?

Companies use the price-to-book ratio (P/B ratio) to compare a firm's market capitalization to its book value. It's calculated by dividing the company's stock price per share by its book value per share (BVPS).

The price-to-book (PB) ratio compares the price of the stock with its book (accounting value). The higher the PB ratio, more expensive is the stock and vice-versa. It gives you an idea of the assets backing the price of the stock in question.

Traditionally, any value under 1.0 is considered a good P/B value, indicating a potentially undervalued stock. However, value investors often consider stocks with a P/B value under 3.0. ... Ratio analysis can vary by industry, and a good P/B ratio for one industry may be a poor ratio for another.

If book value is negative, where a company's liabilities exceed its assets, this is known as a balance sheet insolvency. ... It is equal to a firm's total assets minus its total liabilities, which is the net asset value or book value of the company as a whole.

In banks, the P/B Ratio is the primary measure of valuation. ... When you use P/B Ratio in conjunction with ROE or Return on Equity Ratio, you can get a more effective analysis. This is because ROE + P/B Ratio offers a better insight into the growth prospects of the bank