The market-to-book ratio, or P/B ratio indicates how much shareholders are paying for the net assets of a company. Growth stocks: The P/B ratio for most successful firms substantially exceeds 1, indicating that the value of the firm’s assets when put to use exceeds their historical cost. Analysts often classify those firms as growth stocks. Value stocks: If the P/B ratio is less than 1, indicating investors’ assessment that many of firm’s assets were worth far less than their book value. Analysts often classify those firms as value stocks.
Learn P/B Ratio Evaluation with interactive examples and practice exercises in our Valuation module.
This interactive learning module helps you understand P/B Ratio Evaluation through hands-on practice and real-world examples.