Book value per share
Book value per share = (total assets − total liabilities) ÷ number of shares. It is the company's net worth divided across its shares. If you could sell everything and pay every debt, this is roughly what would be left for each share.
P/B ratio
P/B = share price ÷ book value per share. A P/B of 2 means the market price is twice the book value. A P/B below 1 means the share trades below its book value.
A live example
When P/B is most useful
P/B is popular for banks and finance companies, because their assets and liabilities are mostly financial and close to their market value. It is less useful for companies whose value comes from brands or ideas rather than assets.
How to read it
- Low P/B can point to a bargain, or to a company with weak profits or hidden problems.
- High P/B can reflect strong profits and confidence, or an expensive share.
- Always compare with companies in the same sector, and combine P/B with EPS and P/E.
Limits
Book value uses accounting numbers, which can be out of date. Two companies with the same P/B can have very different quality of assets. Treat it as one clue.
Each stock page on this site, such as NABIL, shows book value and the P/B ratio. You can try ideas risk-free in a free practice account.
For education only. Not investment advice.