What is P/B Ratio?

It's shorthand for price-to-book ratio. Analysts use it to compare a stock's market value and its book value. P/B Ratio tells equity investors how much they're paying for each dollar in net assets.

Where have you heard about P/B Ratio?

Whenever investors are looking for the next big investment opportunity; the P/B Ratio can tell you if the price of a stock today represents good value compared with other stocks in the same industry.

What you need to know about P/B Ratio.

Even though many investors prefer price-to-earnings and price-to-sales when weighing up whether to invest, P/B helps them identify low-priced stocks that might have high-growth potential in the future. It's worked out by dividing the current closing price of a stock by the latest quarter's book value per share. A P/B Ratio of less than one means the stock is trading at less than its book value - in other words it is under-priced. If the ratio is more than one, many investors consider the stock to be overpriced.