Price to book ratio (P/B) / Market value to book ratio (M/B)

Price to book ratio (P/B) or Market value to book ratio (M/B) is one of the indicators of market value and capital market. It is the ratio of the market value of shares with its carrying value. The carrying value may be measured in various ways, one of which may be shareholders' equity.

Calculation formula

Interpretation, recommended value and comparison

Interpretation:

• > 1 → may indicate that the shares are overvalued

•  <1 → may indicate that the shares are undervalued

The recommended value should be > 1.

Comparison of firms in different industries makes little sense, on the contrary, a comparison in the same industry is recommended.