What is the Price to Book Ratio?
Price to Book Ratio Calculator: The Price to Book (P/B) Ratio is a financial metric used to evaluate a company's market value compared to its book value. It helps investors determine whether a stock is undervalued or overvalued. A P/B ratio of less than 1 often indicates that the stock is undervalued, while a ratio above 1 might suggest overvaluation.
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Why Use a Price to Book Ratio Calculator?
Manually calculating the Price to Book Ratio can be time-consuming. A Price to Book Ratio Calculator simplifies the process, providing accurate results instantly. All you need to do is input the market price per share and the book value per share.
How to Calculate the P/B Ratio?
The formula for calculating the Price to Book Ratio is:
P/B Ratio = Market Price Per Share / Book Value Per Share
Example:
Suppose a company's market price per share is $50, and its book value per share is $25. The P/B ratio will be:
P/B Ratio = 50 / 25 = 2
This indicates that the stock is trading at 2 times its book value.
Benefits of Using a P/B Ratio Calculator
- Saves time and effort in manual calculations.
- Provides quick and accurate results.
- Helps in making informed investment decisions.
- Useful for comparing multiple stocks in the same industry.