Price-to-book ratio (P/B)

Book value is assets minus liabilities as recorded on the balance sheet. A P/B below 1 means the market values the company at less than its accounting net worth.

It is most useful for banks, insurers and asset-heavy companies, where book value tracks real assets. For software or consumer brands, most of the value never appears on the balance sheet, so P/B is high and says little. Read it with return on equity.