There are so many investment metrics to choose from and it can be overwhelming for a beginner to decide which to use when evaluating a stock. One of the most classic metrics to value a stock is the Price-to-Book Ratio or PB ratio in short. Price is referring to the share price of the stock. Book refers to the book value of a company. It is also known as Net Asset Value (NAV) or shareholders’ equity. The book value can be calculated by having the total assets less off the total liabilities. This is similar to how you would calculate your personal net worth – you have $2m assets but owe the banks $1m, your net worth would be $1m.

What is a good Price-to-Book ratio

Let’s run through 3 possible scenarios. First, PB ratio = 1, If we multiply Book Value on both sides of the equation, we get,...