Friday, April 1, 2011

What is the Price-To-Book (P/B) Ratio??

A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Also known as the "price-equity ratio".

Calculated as:

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.

A premium profile on gives you access to the data you need. Over the next few weeks we will discuss more phrases.

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