The Price-to-Book (P/B) ratio is a financial metric used to compare a company's market value to its book value. It helps investors understand how much they are paying for a company’s assets relative to its actual worth on paper. The P/B ratio is calculated as:

Where:

• Market Price per Share is the current stock price.
• Book Value per Share is the company's net asset value (total assets minus total liabilities) divided by the number of outstanding shares.

Key Points:

• A P/B ratio of 1 means that the stock is trading at exactly its book value.
• A P/B ratio below 1 might indicate that the stock is undervalued or the company is in distress.
• A P/B ratio above 1 suggests that the market is willing to pay more than the book value, possibly due to expectations of future growth or the company's intangible assets (like brand value).

The P/B ratio is often used for evaluating companies with significant tangible assets, such as in industries like finance or manufacturing.