Price to Book Ratio Calculator: P/B From Market Cap and Equity
Work out a stock's price-to-book ratio — the balance-sheet valuation metric that value investors love and growth investors ignore, for opposite-but-valid reasons.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | P/B ratio (market cap per $1 of book equity) |
|---|---|
| $2B / $1B equity | $2.00 |
| $50B / $40B (bank) | $1.25 |
| $10B / $500M (software) | $20.00 |
| $800M / $1.2B (sub-1) | $0.67 |
How This Calculator Works
Enter market capitalization and shareholders' book equity. The calculator divides one by the other to give P/B — read as 'dollars of market cap per dollar of book equity'.
The Formula
Cost per Unit
Total Amount is the full cost or price, Quantity is the number of units it covers
Worked Example
A $2B market cap company on $1B of book equity trades at a 2x P/B. Banks and insurance companies typically trade at 0.8x to 1.5x P/B; industrial businesses 1x to 3x; software and high-growth tech 5x to 20x or higher because their value lives in IP, brand, and future earnings rather than physical assets.
Key Insight
P/B has split into two stories. For asset-heavy businesses (banks, REITs, insurance, basic industry), book value approximates economic value and P/B is a meaningful indicator — buying at 0.7x book historically beats buying at 1.5x book for the same business. For asset-light businesses (software, brands, biotech), book value reflects almost nothing of what makes the business valuable, and P/B becomes nearly meaningless. Use the metric where it fits the business.
Frequently Asked Questions
How is P/B ratio calculated?
Divide market capitalization by shareholders' book equity. A $2B market cap on $1B of book equity is a 2x P/B.
What is book equity?
Shareholders' equity from the balance sheet — total assets minus total liabilities. Also called book value, common equity, or net worth (in a corporate context).
What is a good P/B ratio?
Banks and insurance: 0.8x to 1.5x; industrials: 1x to 3x; software and high-growth tech: 5x+. Below 1.0x sometimes signals undervaluation, sometimes signals impaired assets — context matters.
Why doesn't P/B work for software companies?
Book equity reflects historical accounting cost of physical assets. Software companies hold most of their value in IP, brand, and earning power — none of which sits on the balance sheet at fair value. P/B for software often looks absurdly high without being a red flag.
When does P/B signal trouble?
When a normally asset-heavy business trades far below 1.0x book — for banks, that often indicates the market expects writedowns on loan or investment portfolios. Persistently low P/B without recovery usually signals real impairment, not undervaluation.
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Methodology & Review
Price-to-book (P/B) is market capitalization divided by shareholders' book equity. The output is read as 'dollars of market cap per dollar of book equity'. P/B is most useful for asset-heavy businesses (banks, insurance, real estate, industrials) where book value approximates economic value.
Written by Ugo Candido · Last updated May 17, 2026.