Price to Book (P/B) Ratio Calculator

Share Price: dollars/share

Total Stockholder Equity: dollars

Preferred Equity: dollars

Total Intangible Assets: dollars

Number of Shares Outstanding: shares

Book Value:

dollars

Book Value per Share:

dollars/share

Price to Book (P/B) Ratio:

times

Tangible Book Value:

dollars

Tangible Book Value per Share:

dollars/share

Price to Tangible Book (P/TB) Ratio:

times

1. What is the Price to Book (P/B) Ratio Calculator?

Definition: This calculator computes the Price to Book (P/B) Ratio and Price to Tangible Book (P/TB) Ratio, financial metrics that compare a company’s market share price to its book value per share, indicating whether a stock is overvalued or undervalued relative to its net assets.

Purpose: Helps investors assess a company’s valuation, particularly for asset-heavy industries like banking, and identify potential investment opportunities by comparing market price to accounting value.

2. How Does the Calculator Work?

The calculator follows a step-by-step process to compute the P/B and P/TB ratios:

P/B and P/TB Ratio Formulas:

$ BV = E - P $

$ BVPS = \frac{BV}{S} $

$ PBR = \frac{SP}{BVPS} $

$ TBV = BV - I $

$ TBVPS = \frac{TBV}{S} $

$ PTBR = \frac{SP}{TBVPS} $

Where:

$ BV $: Book Value (dollars)
$ E $: Total Stockholder Equity (dollars)
$ P $: Preferred Equity (dollars)
$ BVPS $: Book Value per Share (dollars/share)
$ S $: Number of Shares Outstanding (shares)
$ PBR $: Price to Book (P/B) Ratio (times)
$ SP $: Share Price (dollars/share)
$ TBV $: Tangible Book Value (dollars)
$ I $: Total Intangible Assets (dollars)
$ TBVPS $: Tangible Book Value per Share (dollars/share)
$ PTBR $: Price to Tangible Book (P/TB) Ratio (times)

Steps:

Step 1: Calculate Book Value ($ BV $). Subtract Preferred Equity ($ P $) from Total Stockholder Equity ($ E $).
Step 2: Calculate Book Value per Share ($ BVPS $). Divide Book Value ($ BV $) by Number of Shares Outstanding ($ S $).
Step 3: Calculate P/B Ratio ($ PBR $). Divide Share Price ($ SP $) by Book Value per Share ($ BVPS $).
Step 4: Calculate Tangible Book Value ($ TBV $). Subtract Total Intangible Assets ($ I $) from Book Value ($ BV $).
Step 5: Calculate Tangible Book Value per Share ($ TBVPS $). Divide Tangible Book Value ($ TBV $) by Number of Shares Outstanding ($ S $).
Step 6: Calculate P/TB Ratio ($ PTBR $). Divide Share Price ($ SP $) by Tangible Book Value per Share ($ TBVPS $).

3. Importance of P/B and P/TB Ratios

Calculating these ratios is crucial for:

Valuation Analysis: A low P/B or P/TB ratio may indicate undervaluation, while a high ratio suggests overvaluation or strong market confidence in future growth.
Industry Relevance: Particularly useful for asset-intensive sectors (e.g., banking, real estate) where book value reflects tangible worth.
Financial Health: P/TB ratio excludes intangibles, providing a conservative view of a company’s net asset value.

4. Using the Calculator

Example: $ SP = \$20.00 $, $ E = \$50,000,000 $, $ P = \$5,000,000 $, $ I = \$10,000,000 $, $ S = 2,000,000 $:

Step 1: Book Value: $ BV = 50,000,000 - 5,000,000 = 45,000,000 $ dollars
Step 2: Book Value per Share: $ BVPS = \frac{45,000,000}{2,000,000} = 22.50 $ dollars/share
Step 3: P/B Ratio: $ PBR = \frac{20.00}{22.50} = 0.89 $ times
Step 4: Tangible Book Value: $ TBV = 45,000,000 - 10,000,000 = 35,000,000 $ dollars
Step 5: Tangible Book Value per Share: $ TBVPS = \frac{35,000,000}{2,000,000} = 17.50 $ dollars/share
Step 6: P/TB Ratio: $ PTBR = \frac{20.00}{17.50} = 1.14 $ times
Result: $ BV = \$45,000,000.00 $, $ BVPS = \$22.50 $, $ PBR = 0.89 $ times, $ TBV = \$35,000,000.00 $, $ TBVPS = \$17.50 $, $ PTBR = 1.14 $ times

A $ PBR $ of 0.89 suggests potential undervaluation, while a $ PTBR $ of 1.14 is closer to fair value, depending on industry norms.

Example 2: $ SP = \$30.00 $, $ E = \$100,000,000 $, $ P = \$0 $, $ I = \$20,000,000 $, $ S = 5,000,000 $:

Step 1: Book Value: $ BV = 100,000,000 - 0 = 100,000,000 $ dollars
Step 2: Book Value per Share: $ BVPS = \frac{100,000,000}{5,000,000} = 20.00 $ dollars/share
Step 3: P/B Ratio: $ PBR = \frac{30.00}{20.00} = 1.50 $ times
Step 4: Tangible Book Value: $ TBV = 100,000,000 - 20,000,000 = 80,000,000 $ dollars
Step 5: Tangible Book Value per Share: $ TBVPS = \frac{80,000,000}{5,000,000} = 16.00 $ dollars/share
Step 6: P/TB Ratio: $ PTBR = \frac{30.00}{16.00} = 1.88 $ times
Result: $ BV = \$100,000,000.00 $, $ BVPS = \$20.00 $, $ PBR = 1.50 $ times, $ TBV = \$80,000,000.00 $, $ TBVPS = \$16.00 $, $ PTBR = 1.88 $ times

A $ PBR $ of 1.50 and $ PTBR $ of 1.88 suggest the stock may be fairly valued or slightly overvalued, depending on the sector.

Example 3: $ SP = \$10.00 $, $ E = \$25,000,000 $, $ P = \$2,000,000 $, $ I = \$3,000,000 $, $ S = 1,000,000 $:

Step 1: Book Value: $ BV = 25,000,000 - 2,000,000 = 23,000,000 $ dollars
Step 2: Book Value per Share: $ BVPS = \frac{23,000,000}{1,000,000} = 23.00 $ dollars/share
Step 3: P/B Ratio: $ PBR = \frac{10.00}{23.00} = 0.43 $ times
Step 4: Tangible Book Value: $ TBV = 23,000,000 - 3,000,000 = 20,000,000 $ dollars
Step 5: Tangible Book Value per Share: $ TBVPS = \frac{20,000,000}{1,000,000} = 20.00 $ dollars/share
Step 6: P/TB Ratio: $ PTBR = \frac{10.00}{20.00} = 0.50 $ times
Result: $ BV = \$23,000,000.00 $, $ BVPS = \$23.00 $, $ PBR = 0.43 $ times, $ TBV = \$20,000,000.00 $, $ TBVPS = \$20.00 $, $ PTBR = 0.50 $ times

Low $ PBR $ (0.43) and $ PTBR $ (0.50) ratios strongly suggest undervaluation, potentially indicating a bargain or underlying financial concerns.

5. Frequently Asked Questions (FAQ)

Q: What is a good P/B ratio?
A: A $ PBR $ below 1 may indicate undervaluation, while above 3 may suggest overvaluation, but it depends on the industry. For example, banks often have $ PBR $ around 1–2, while tech firms may have higher ratios. Compare to industry peers for context.

Q: Why is the P/TB ratio important?
A: The $ PTBR $ excludes intangible assets (e.g., goodwill), providing a more conservative valuation, especially for companies with significant intangibles or in distressed situations.

Q: Can the P/B ratio be negative?
A: Yes, if $ BV $ is negative (liabilities exceed assets), but this is rare and signals financial distress. Negative ratios are less meaningful for valuation.