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The Price-To-Book ratio (P/B ratio) is used to compare a stock's market value to its book value. It is also known as the "price-equity ratio". The ratio is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.[1]

Calculation and interpretation

The ratio is calculated as: Stock Price / (Total Assets - Intangible Assets and Liabilities)

A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. As with most ratios, be aware that this varies by industry.

This ratio also gives some idea of whether you're paying too much for what would be left if the company went bankrupt immediately.

The P/B ratio should not to be confused with the P/E ratio (Price / Earnings ratio).


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