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Price-to-Book (P/B)

Many investors use the price-to-book ratio (P/B ratio) to compare a firm's market capitalization to its book value and locate undervalued companies. This ratio is calculated by dividing the company's current stock price per share by its book value per share (BVPS).


Formula and Calculation of the Price-to-Book (P/B) Ratio

P/B Ratio = Market Price per Share / Book Value per Share

where:

  • Market Price per Share = Current market price of the share

  • Book Value per Share = (Total assets - intangible assets - total liabilities) / number of outstanding shares


Market value per share is obtained by looking at the information available on most stock tracking websites. You need to find the company's balance sheet to obtain total assets, total liabilities, and outstanding shares.


Source: Investopedia, Price-to-Book (PB) Ratio: Meaning, Formula, and Example, accessed 24 December 2023, <https://www.investopedia.com/terms/p/price-to-bookratio.asp>


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