The formula
How to calculate price to book
Price to book compares what the market charges for a share against the accounting value of the net assets behind it. It is the classic value screen, and it works best where the balance sheet genuinely reflects the business.
Book value is an accounting construct: assets at historic cost less depreciation, minus liabilities. For a bank or an insurer that is close to economic reality; for a software company whose main asset is its engineers, it is not.
What to enter:
- Share price
- Book value per share — shareholders' equity divided by shares in issue
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
Worked example
Work through the defaults on this page:
- Share price: 42
- Book value per share: 28
That gives:
- Price to book: 1.5 ×
- Premium to net assets: 50 %
- Net assets per £1 of price: 0.67
Reading the result
Below 1 the market values the company at less than its stated net assets, which either signals distress or a genuine mispricing. Above 3 the value sits mostly in things the balance sheet does not carry — brand, code, customer relationships.
Where this goes wrong. Applying it to asset-light businesses. Companies with heavy intangibles, large buybacks or big goodwill write-offs can show a distorted or even negative book value, and the ratio stops meaning anything.
No. It often means the market expects the assets to earn a poor return, or to be written down. Pair it with return on equity: low P/B plus decent ROE is interesting, low P/B plus falling ROE usually is not.
Because their assets are mostly financial instruments carried close to market value, so book value approximates what the business is genuinely worth. For most other sectors, earnings and cash flow multiples say more.
The answer it gives you is price to book. With 42 share price and 28 book value per share, that comes to 1.5 ×. Change any field and the figure moves with it.