Price to Book Ratio Calculator

The price-to-book (P/B) ratio evaluates a company's market capitalization relative to its book value. First, the book value per share (BVPS) is computed by subtracting any preferred equity from the total stockholder equity, then dividing the result by the total number of shares outstanding: BVPS = (Total Stockholder Equity - Preferred Equity) / Number of Shares Outstanding. Next, the P/B ratio is determined by dividing the current share price by this book value per share: P/B Ratio = Share Price / BVPS. For a more conservative metric, the calculator also computes the tangible book value per share by subtracting total intangible assets from the equity before dividing by shares.

Imagine you are evaluating Apex Corporation, a manufacturing firm. Apex has a current share price of $45.00 and 10,000,000 shares outstanding. Its balance sheet shows total stockholder equity of $300,000,000, preferred equity of $20,000,000, and total intangible assets of $10,000,000. First, we calculate the book value per share: ($300,000,000 - $20,000,000) / 10,000,000 = $28.00 BVPS. Next, we divide the share price by the BVPS: $45.00 / $28.00 equals a P/B ratio of approximately 1.61. For the tangible book value, we subtract the $10,000,000 in intangibles, leaving $270,000,000, which results in a tangible book value per share of $27.00 and a tangible P/B ratio of $45.00 / $27.00 = 1.67.

When analyzing stocks with this calculator, keep these guidelines in mind: 1) Compare P/B ratios only within the same industry, as asset-heavy sectors naturally have lower ratios than tech firms with high intellectual property. 2) Watch out for share buybacks or heavy debt loads, which can artificially inflate or deflate stockholder equity. 3) Always cross-reference the P/B ratio with profitability metrics like Return on Equity (ROE) to ensure low valuations are not traps for fundamentally failing businesses.