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| Price to book ratio (P/B) |
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Price to book ratio (P/B) To calculate price to book ratio, take the book value per share and divide by the last reported close.
For example: If a company's close price was $10 and the book value per share was $2, then the price to book ratio would be 5 (10/2=5). A price to book ratio is similar to P/E in the respect that it can also be calculated using individual stocks or market indexes like the S&P. It is important that investors using price to book value ratio understand book value and its limitations. Limitations in book value also directly apply to price to book ratio. |
