What does a stock’s price-to-book ratio compare with its book value per share?

A stock’s price-to-book ratio compares its market price per share with its book value per share.

The P/B ratio is calculated by dividing the current share price by book value per share. Book value generally represents shareholders’ equity recorded on the balance sheet, although the exact calculation can adjust for items such as preferred equity or intangible assets. The ratio therefore connects a market valuation with an accounting measure.

A P/B ratio above 1 means the market price exceeds the stated book value per share; a ratio below 1 means it is lower. Neither result automatically identifies a bargain or a problem. Investors interpret P/B alongside profitability, growth, asset quality, debt, and industry characteristics.

P/B can be more informative for asset-heavy businesses such as banks or insurers. It may be less useful for companies whose value depends heavily on internally developed brands, software, or other assets that accounting rules do not fully record at market value.