Price to Book Ratio Calculator
The Price to Book Ratio Calculator is a financial tool used to compare a company's current market price per share with its book value per share. Investors use this ratio to evaluate whether a stock is undervalued or overvalued. A lower ratio might indicate an undervalued stock, while a higher ratio could indicate overvaluation. This tool helps investors make informed decisions when analyzing company stocks for investment.
Formula
Price to Book Ratio = Market Price per Share / Book Value per Share
How to Use the Price to Book Ratio Calculator
Enter the company's market price per share in the first input box and its book value per share in the second input box. Click on the "Calculate" button to find the Price to Book Ratio. The result will be displayed below along with the formula used. You can use the "Clear" button to reset the inputs and results.
Calculator
FAQs
What is the Price to Book Ratio?
The Price to Book Ratio is a financial metric that compares a company’s market value to its book value. It helps investors evaluate whether a stock is overvalued or undervalued.
How do you calculate the Price to Book Ratio?
To calculate the Price to Book Ratio, divide the market price per share by the book value per share. Use our calculator for quick and accurate results.
Why is the Price to Book Ratio important?
It helps investors understand how the market values a company relative to its net assets, guiding investment decisions.
What does a low Price to Book Ratio indicate?
A low ratio may indicate an undervalued stock, presenting a potential buying opportunity for investors.
What does a high Price to Book Ratio indicate?
A high ratio might indicate an overvalued stock, signaling potential risks for investors.
Is the Price to Book Ratio useful for all industries?
It is more useful for asset-heavy industries, such as banking or manufacturing, and less relevant for tech or service sectors.
Can the Price to Book Ratio be negative?
Yes, a negative ratio occurs when a company’s liabilities exceed its assets, indicating potential financial distress.
What are the limitations of the Price to Book Ratio?
The ratio doesn’t consider intangible assets or future growth potential, limiting its usefulness for some companies.
How is the Price to Book Ratio different from the P/E Ratio?
The P/B ratio evaluates a company’s assets, while the P/E ratio focuses on its earnings. Both are useful but serve different purposes.
Can I rely solely on the Price to Book Ratio for investment decisions?
No, it’s best used alongside other financial metrics and qualitative analysis to make well-rounded investment decisions.