Price to Book (P/B) Ratio Calculator, Book Value Calculator and Book Value Formulas.
Calculate Price to Book Ratio (P/B) quickly and easily: With this free online calculator you can calculate the price to book ratio by entering the current share price and the book value per share. Use the second calculator to determine the book value per share. The price book ratio is one of the most important metrics in the valuation of stocks. The P/B Ratio should be below 1-3 to show an undervalued stock, depending on wether its a growth stock like tech or a traditional industry stock. In growth stocks you may accept a higher P/B ratio.
Book value = Total Assets – Total Liabilities: Assets are the items your company owns that can provide future economic benefit. Liabilities are what you owe other parties. In short, assets put money in your pocket, and liabilities take money out!
To calculate the Price to Book Ratio (P/B), you need to insert the current share price and the book value per share. You can find the current share price simply via a Google search by entering the “name of the share” and “share price”. Google then shows the current share price directly.
To find out the book value per share, you can use this calculator. Some stock data websites such as Yahoo Finance already offer the book value per share in the “Fundamental” category.
With our Unlimited Access, we have already calculated the P/B Ratio for more than 35,000 shares. In addition to the Price to Book Ratio (P/B), you will receive all other important ratios for fundamental Analysis and additionally all relevant stock valuation models automatically calculated.
Formula P/B Ratio Price to Book:
The formula for calculating the Price to Book Ratio (P/B) divides the market capitalization (current share price times the number of shares issued) by the book value. The result is the price / book ratio or P/B for short.
Price to Book Ratio = Market Capitalization / Book Value
Alternatively, the P/B can also be calculated for the individual stock by dividing the current share price by the book value per share. The book value per share is obtained by dividing the equity (book value) by the number of shares issued.
Price to Book Ratio = Share Price / Book Value per Share
In our book value calculator, we use the second variant. An auxiliary calculator is available for this purpose, which calculates the book value per share and then adds it to the main calculator at the top. You can usually find data such as book value, number of shares issued, share price and book value per share on relevant stock websites such as: Yahoo Finance. Enter the name of the stock whose Price / Book ratio (P/B) you would like to know. Under the tab “Fundamental key figures” you will find all the financial key figures that you need to calculate the Price / Book ratio (P/B).
Enter these key figures here in our calculator and you will receive a reliable Price to Book Ratio.
Book Value per Share Calculator
To find out the book value per share, you need to enter the total equity or book value and the number of shares in the company issued into the second calculator. Equity is the capital brought into the company by shareholders and owners and is the result of the positive difference between assets and debts. The number of shares is the sum of all shares issued. This information can also be found quickly using a Google search. These key financial figures can also be found in the annual report of the respective company, which can also be easily found on Google with the “name of the company” and the keyword “investors relations”.
WHATS A GOOD PRICE TO BOOK P/B RATIO?
A Price to Book ratio (P/B) below 1 shows an undervalued stock. Since the book value represents the company’s equity, if the P/B is below 1, the company cannot even expect the value of its net assets. Example: A public company has assets of 10 million Euro: Cash, real estate, machines and patents. In addition, there are 5 million Euro in debt.
It follows that the company’s equity amounts to 5 million Euro. (Equity = Assets – Debt). If the share is quoted at 5 euros each and 1 million shares have been issued, the company’s market capitalization is 5 million euros. The market capitalization (share price times the number of shares issued) would therefore correspond to equity, so the price of the share also corresponds to the book value per share. The price to book ratio would be 1 and the share would be valued fairly based on the price to book ratio (P/B).
If the P/B would be below 1, the market price would be lower than the net worth and the public company would be undervalued. If you buy shares with a P/B ratio of less than 1, you pay less for the company than it is actually worth on paper. If the company were to shut down and all equipment, machinery, patents, real estate, etc. were sold and the cash split up, you would still get more money than you spent buying the stock.
A share that has a P/B below 1 is not automatically a good stock to buy. A low P/B can indicate both a cheap company and a company in serious trouble. A first look at the P/B can pay off to clarify whether the company is worth a closer look. Subsequently, however, it must be clarified why the company is valued so favorably. For this purpose, you can incorporate further key figures and ratios into the evaluation process.
Only the holistic analysis of the public company reveals whether a company is really cheap or expensive. In the calculator for the extended fair value, for example, 7 key figures flow into the calculator at the same time in order to obtain a more meaningful result.
How to find stocks with a low P/B Ratio
Stock screeners are particularly useful for finding stocks with a low P/B Ratio. Here you can enter various key figures in the stock screener and list the stocks according to the setting of the fundamental key figures. In the premium area you will also find a stock screener that filters all stocks according to the most important key figures. You are also able to look for companies with a low Price to Book Ratio.
Conclusion:
The Price to Book Ratio (P/B) is one of the most important key figures in the valuation of stocks. Unfortunately, the P/B, which is shown on stock portals, is often out of date and not always correct. Only if you calculate the P/B yourself you know where the data for the calculation comes from and how up-to-date the share price used is. A P/B of less than 1-3 can both indicate a cheap company and indicate serious problems in the company.
The P/B is therefore not suitable as the sole valuation indicator and only the joint consideration of various indicators provides information about whether a share is actually a bargain. We have also created additional calculators and explanations for other key figures. In the free online calculators section you will find other useful calculators that facilitate the valuation process of stocks.
The Price to Book ratio (P/B) together with the Price / Earnings Ratio (P/E) and the Price / Sales ratio (P/S) can indicate not only cheap stocks but also cheap sectors, especially in a cross-sector view. The average values of these key figures indicate favorable industries, in which, as a result, cheap stocks can usually also be found.
An industry-wide crisis such as a rise in the price of raw materials or temporary changes in the market environment of an industry can temporarily devalue an entire industry. Look at our Sector Analysis Tool to view entire sectors with their key ratios.
As a result, these industries often show a low price / book value ratio. In the industry, you can then look for stocks that actually show little real economic loss in the industry. However, the stock price of these companies is devalued because the entire industry is currently suffering “image damage” and is not “in vogue” due to negative reporting. These investments can then be very profitable in the long run.
In 2020, the share price of the car maker Tesla skyrocketed. Like a magnet, this stock soaked up capital and made Elon Musk, the founder of Tesla Motors, the richest man in the world. The Tesla hype has caused the valuation of Tesla shares to explode. At price highs, a Price to Book Ratio of over 40 was accepted for Tesla in order to participate in the hype.
Almost quietly and secretly, all German carmakers were devalued and the shares of Daimler and VW fell parallel to the rise of Tesla. Daimler and VW were dirt cheap with a P/B under 1. It seemed as if the old German car giants were not able to bring a decent electric car onto the market, the market participants lacked a raging story with growth fantasies. In addition, VW suffered from the final effects of the Dieselgate scandal. A double bargain?
Of course, one of the largest automakers in the world with an excellent sales network and the best engineers in the world is capable of producing at least as good electric vehicles – if they have to. With the introduction of new electric models from Mercedes and VW, the throne of the electric car pioneer is crumbling. The true intrinsic value of a stock tends to come to light sooner or later.
In 2021, Tesla’s share price shows a decline and the German carmakers were able to catch up. The P/B has reliably indicated a current bargain in the car industry and in the individual stocks. In this situation, of course, one had to assess whether a “Nokia effect” could occur and the German carmaker would completely disappear from the scene and Tesla would become the new Apple of the automotive industry.
The price of the Daimler and VW shares recovered strongly. In order to recognize such industry effects, we have set up an industry overview in the which shows the average P/E, P/B and P/S figures for each industry. If an industry is valued favorably, the industry turns green and within seconds you can see in which industries bargains are very likely to be found. Try our Tools now within our free trial.
