Price-to-Book Ratio

The price-to-book ratio divides a company's share price by its book value per share — the accounting value of its assets minus its liabilities, spread across the shares. It asks: how much is the market paying relative to the company's net worth on paper? A P/B of 1 means the price equals book value; above 1 means investors pay a premium to book; below 1 means the market values the company at less than its stated net assets.

P/B has long been a staple of value investing:

• Low P/B (near or below 1): potentially undervalued — or a business whose assets are impaired or earning poor returns.
• High P/B: the market expects the assets to generate strong returns (or the company's real value is in intangibles the books don't capture).

P/B works best for asset-heavy businesses — banks, insurers, industrials — where the balance sheet reflects real, tangible value. It's far less meaningful for asset-light software or brand-driven firms, whose worth lives in intangibles that accounting largely omits. Pair it with the P/E ratio for a fuller picture.

P/B is a quick value screen and a useful cross-check on the P/E ratio, especially for financials and asset-heavy sectors. Its danger is applying it blindly: a very low P/B can be a genuine bargain or a company whose assets are worth less than the books claim (a value trap), and a high P/B is normal for asset-light businesses. Like every single metric, it's context, not a verdict.

Entry Point Trading centers its daily signal on price, trend, and risk, treating valuation ratios as background context — every call graded in the open, no return claims.