price to book ratio (P/B)
A measure used to identify value stock investment opportunities. A company's price to book ratio is calculated by dividing its total market capitalization by its book value. Taken alone, the price to book ratio may or may not be meaningful. Compared with its competitors or the average for the industry or sector, the price to book ratio can identify a company that is undervalued and which might present an investment opportunity. Alternatively, P/B can be calculated on a per share basis, although the resulting ratio will be the same as for the company as a whole.
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