Price-to-Book (P/B)

Price-to-Book (P/B) is a ratio that compares a company's stock price to its book value—basically what the company's assets would be worth if sold today, minus its debts, divided by the number of shares outstanding. You'll see this metric when comparing stocks, especially in industries like banking or manufacturing where physical assets matter. A lower P/B might suggest a stock is undervalued, while a higher one could mean investors are paying a premium for growth potential. For example, if Company A trades at a P/B of 1.5 while Company B is at 3.0, Company A's stock price is closer to its underlying asset value. Keep in mind: P/B works better for asset-heavy businesses than for tech companies that rely on intangibles.