Price to Book Ratio

Online Calculators for Business & Investment

Price to Book Ratio

The Price to Book Ratio is a market and valuation ratio that displays the number of times over the price of a company's stock of a company covers the book value of the company's equity. The higher the result, the higher the premium for the company's equity.

A high ratio indicates that a company is valued highly, or possibly that it is a growth stock or otherwise popular stock.

The Price to Book Ratio can be affected by market sentiment, for example a bull market may lead to many companies having a high Price to Book Ratio; and vice versa for a bear market.

However, according to academic theory, when the business earns a ROE greater than it's cost of capital, then this will lead to an increase in value which in turn leads to a premium of price over book value.

Further, the book value of a company's shares is an accounting number and reflects accounting standards. Market value, on the other hand, is the value what people are willing to trade shares for. Therefore, this ratio tells us a multiple of what people are prepared to pay for the accounting equity in the financial statements.

Price to Book Ratio Calculator

The calculator asks for:
Stock Price, you can find this in the financial media or from your broker.
Equity, which is found in the Balance Sheet
Issued Common Shares Outstanding, which is found in the financial media or in the Notes to the Financial Statements.

Stock Price ($):

Equity ($):

Issued Common Shares Outstanding:

Price to Book Ratio:

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