Price-to-Book Ratio (P/B)
The P/B ratio compares a company's share price to its net assets per share.
Book value per share is the company's total assets minus total liabilities divided by the share count — essentially the theoretical liquidation value per share. A P/B of 1 means you're paying exactly book value.
Financials and asset-heavy businesses like banks and insurers are commonly valued on P/B because their assets (loans, securities) are close to market value. Technology and consumer-brand businesses carry enormous intangible value that never appears in book value, making P/B less meaningful there.
A P/B below 1 can signal deep value or genuine distress — the market believes the assets are worth less than stated, or that the business is destroying value.
Example
If a bank's book value per share is £8.00 and the share price is £12.00, the P/B is 1.5×.
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