valuation
P/B Price-to-Book Ratio
Market cap divided by book value (total assets minus liabilities). Compares market price to the company's net asset value.
Formula
P/B = Market Cap / (Total Assets − Total Liabilities)
How to Interpret
Below 1x means the market values the company below its liquidation value — could be undervalued or distressed. Banks typically trade at 1-2x book. Tech companies often 10x+ because their value is in intangibles (IP, brand, network effects).
Why It Matters
P/B is most useful for asset-heavy industries (banking, real estate, manufacturing). It's less relevant for tech companies where most value comes from intangible assets that don't appear on the balance sheet.
Example
If a bank has a $40B market cap and $25B of shareholder equity, its P/B is 1.6x ($40B ÷ $25B). The market values each dollar of book value at $1.60.