What is Price to Book Ratio?

Price to Book Ratio is defined as (Current Price of a share) / (Book Value of a share). The Current Price of a share is the current price on stock market, while the Book Value of a share is the value of a share stated in the annual report. After liquidation of the firm and selling every brick, in theory, you should get book value. Therefore, the Current Price should be greater then Book Value, but that is not always true. If you want to compare two firms you could check Price to Book ratio. Smaller PB Ratio could be mean that the firm is undervalued. It is important to notice, as with other ratios, it makes sense to compare PB Ratios of two firms within the same industry. Different industries might have different PB Ratios. The Current Price of a share could be found on the stock market (NASDAQ), and the Book Value of a share could be found on the site of US Securities and Exchange Commission