Price-to-book ratio

Price-to-Book

A ratio of the share price of a publicly-traded company to its book value per share, which is the company's total asset value less the value of its liabilities. The P/B is a ratio of investor sentiment on the value of a stock to its actual value according to the Generally Accepted Accounting Principles. A high P/B means either that investors have overvalued the company, or that its accountants have undervalued it.

Price-to-book ratio.

Some financial analysts use price-to-book ratios to identify stocks they consider to be overvalued or undervalued.

You figure this ratio by dividing a stock's market price per share by its book value per share.

Other analysts argue that book value reveals very little about a company's financial situation or its prospects for future performance.

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Morris uses the price-to-book ratio, a measure of a stock's value in comparison to the worth of a company's hard assets, to separate the winners from the losers.
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As with the P/E ratio, a mutual fund's price-to-book ratio is the weighted average of all of the fund's holdings.
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The forecast volatility is calculated using historical market data such as share price and trading volume, financial key figures (ratio of dividends to price, price-to-book ratio, forecast earnings growth), sector and total shareholder return.
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A company with a book value of $5 per share and a stock price of $15 has a price-to-book ratio of 3:1.
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