YOVID logo
YOVIDAI Investing Companion
intermediate 2 min read

What is P/B Ratio?

How much you pay for ₹1 of accounting book value.

P/B = Price ÷ Book Value per share. Book value is roughly what would be left for shareholders if the company sold every asset and repaid every debt.

P/B is most useful for asset-heavy businesses like banks. A bank at P/B 3 is expensive; a bank at P/B under 1 is cheap (but may be cheap for a reason).

For asset-light businesses (software, brands), book value understates the real economic value — brand, code, customer relationships don't sit on the balance sheet. So P/B is less useful there.

Use P/B together with ROE. A high ROE (say 20%) with a low P/B (say 1.5) can point to a real bargain. A low ROE with a low P/B is usually a value trap.

Read next