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Investing & the Stock Market vocabulary · Valuation & Ratios

Price-to-book ratio

Meaning in investing & the stock market, with examples

/ˌpraɪs tə ˈbʊk ˌreɪʃioʊ/nounCommon term

In investing & the stock market, price-to-book ratio means: A company's share price divided by its book value per share, or its market capitalization divided by its book value. It compares market value with accounting value.

In Turkish: piyasa değeri/defter değeri oranı, PD/DD oranı, PD/DD çarpanı

How it is used

Often written P/B or P/BV and said 'P-B ratio' or 'price to book'. Especially important for banks and financial companies. A ratio below 1 means the market values the company at less than its book value.

Example sentences

  1. Turkish banks were trading at a price-to-book ratio below one for most of the year.

  2. A low price-to-book ratio alone does not make a stock a bargain.

Common collocations

  • low price-to-book ratio
  • P/B multiple
  • trade at a price-to-book of
  • price-to-book below one
  • book valueThe value of a company according to its balance sheet: total assets minus total liabilities. It is the shareholders' equity shown in the accounts.
  • P/E ratioShort for price-to-earnings ratio: a company's share price divided by its earnings per share. It shows how much investors pay for each unit of yearly profit.
  • return on equityA company's net profit divided by its shareholders' equity, shown as a percentage. It measures how much profit a company makes with the money its owners have invested.
  • undervaluedPriced lower than its estimated real value, based on profits, assets, cash flow or growth prospects. Like 'overvalued', it is a judgement.

More terms: Valuation & Ratios

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This page explains English vocabulary for learners. It is not financial advice.