Price to Book Value Ratio. A valuation ratio used by investors which compares a stock's per-share price (market value) to its book value (shareholders' equity). The price-to-book value ratio, expressed as a multiple (i.e. how many times a company's stock is trading per share compared to the company's book value per share), is an indication of how much shareholders are paying for the net assets of a company.
The book value of a company is the value of a company's assets expressed on the balance sheet. It is the difference between the balance sheet assets and balance sheet liabilities and is an estimation of the value if it were to be liquidated.
The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm.
Price to Book Value Ratio = Stock price Per Share/Shareholders equity per share
Example: What is Alphabet's, Inc. Price/Book Value Per Share: $756.05/175.26 = 4.31
Brought to you by ThrushyMedia