Book Value and P/B Ratio Explained
7/6/2026
fundamentals
guide
Book value = assets minus liabilities: the accounting net worth. P/B compares price to it.
Level by level
Beginner
P/B below 1 means the market prices the company below its net assets — a classic value-hunting ground, and sometimes a warning.
Intermediate
P/B works best where assets are real and marked (banks, manufacturers); for software and brands the real assets are intangible and invisible to book value.
Advanced
Pair P/B with ROE (the DuPont link: justified P/B tracks ROE vs cost of equity). Low P/B + high ROE is the interesting quadrant; low P/B + low ROE is usually fair pricing of a bad business.
Common mistakes
- Screening tech companies by P/B
- Assuming P/B below 1 is automatically a bargain
Practise & tools
_Educational content only — not financial advice. Historical behaviour never guarantees future results._
Keep learning — free tools