What is the price-to-book ratio formula?

P/B = market price per share ÷ book value per share, where book value per share = (total equity − preferred equity) ÷ common shares outstanding.

What is a good P/B ratio?

It varies by industry. Below 1 can indicate value (or trouble); banks often trade near 1, technology companies much higher.

How are P/B, P/E and ROE related?

P/B = P/E × ROE, because book value × ROE = earnings.

Can book value be negative?

Yes, after large losses or buybacks. The P/B ratio is then not meaningful.

Price-to-Book (P/B) Ratio Formula

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Price-to-Book (P/B) Ratio Calculator

The price-to-book ratio compares a company’s share price with its book value per share, the accounting value of shareholders’ equity divided by the number of common shares. It shows how much the market is paying for each unit of net assets recorded on the balance sheet.

Formula

P/B = Price per shareBook value per share BVPS = Total shareholders’ equity − Preferred equityCommon shares outstanding

Where

Price per share: current market price
Book value per share: accounting equity belonging to each common share
Total equity: total shareholders’ equity from the balance sheet

Calculator

Share price

Total shareholders' equity

Preferred equity

Common shares outstanding

Result and step-by-step solution

Price-to-book ratio

2.5×

The market values each 1.00 of book equity at 2.50.

Book value per share
900,000,000.00 − 0.0050,000,000 = 18.00
Divide the price by it
45.0018.00 = 2.5

How to use the formula

Book value per share uses total shareholders’ equity minus any preferred equity, divided by common shares outstanding. A P/B below 1 means the shares trade for less than the company’s recorded net assets, which can signal undervaluation or that the market doubts the assets are worth their book value. A high P/B is common for companies whose value lies in brands, software or people, which accounting largely leaves off the balance sheet.

In the example, equity of 900,000,000 over 50,000,000 shares gives a book value of 18 per share; at a price of 45 the P/B is 2.5. P/B is most useful for banks, insurers and other asset-heavy businesses. It is linked to the P/E ratio through return on equity: P/B = P/E × ROE, so see the ROE formula too.

Frequently asked questions

What is the price-to-book ratio formula?: P/B = market price per share ÷ book value per share, where book value per share = (total equity − preferred equity) ÷ common shares outstanding.
What is a good P/B ratio?: It varies by industry. Below 1 can indicate value (or trouble); banks often trade near 1, technology companies much higher.
How are P/B, P/E and ROE related?: P/B = P/E × ROE, because book value × ROE = earnings.
Can book value be negative?: Yes, after large losses or buybacks. The P/B ratio is then not meaningful.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.