Glossary · Valuation
Price-to-Book (P/B)
The price-to-book ratio is market cap divided by book value (total assets minus total liabilities). It measures how much the market is willing to pay for each dollar of net assets on the company's books.
How to read it
For banks, insurers and other industries where the balance sheet is the business, P/B is a core valuation metric, usually read together with return on equity (ROE).
For technology companies and consumer brands, most of the value (brand, technology, users) is not on the balance sheet, so P/B tells you very little.
Common pitfalls
- Heavy buybacks reduce book value and can push P/B very high or even negative (McDonald's and Starbucks, for example). That does not mean anything is wrong with the company.
On FinDog
P/B appears under "Valuation" in the Decision Panel on each stock page.
See it on a stock page →Related terms
- P/E RatioThe P/E ratio is the share price divided by earnings per share, which is the same as market cap divided by net income. It tells you how many years of earnings at the current level it would take to earn back the purchase price. TTM means the calculation uses trailing-twelve-month earnings.
- Share BuybackA buyback is a company using cash to repurchase its own shares on the market and retire them. With fewer shares outstanding, earnings per share and each share's claim on the company both go up. It is the other way, besides dividends, of returning capital to shareholders.
Glossary entries are for investor education only and are not investment advice. About & Methodology · Disclaimer