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The Price to Book Ratio is a measure of a company common stock price in relation to the book value of each share. The price to book ratio is a high level indicator of whether or not a company's stock price is undervalued.
The calculation for a company's price to book ratio is:
Stock Price per Share / Book Value per Share
The price to book ratio can vary significantly by industry, but generally, the lower the price to book ratio, the more valued a company. A price to book ratio below 1.0 indicates a problem at the company or the market is not valuing it correctly since a share of stock is worth more than it is selling for on the market. |
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