Long-term investing

P/B ratio

Defined in 1 lesson · Updated October 17, 2026

Definition

Share price ÷ book value per share (assets minus liabilities, divided by shares). A classic value measure that misses intangible assets such as software, brands and patents.

Example

Say company XYZ has $900 million of assets, $500 million of liabilities and 20 million shares, so its book value is $400 million ÷ 20 million = $20 per share. At a share price of $30, its P/B is 1.5. A software company might trade at 8 times book, largely because its code and brand barely appear on the balance sheet, not necessarily because it is overpriced.

Hypothetical numbers, for illustration only.

Two company cards: Company A, P/E 40 and growth 40%, gives a PEG of 1.0; Company B, P/E 20 and growth 5%, gives a PEG of 4.0; a note reads PEG = P/E ÷ growth rate.

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