What is a good price-to-book ratio?

It depends heavily on the sector. Banks and financial companies typically trade at 1x–2x book. Industrial and consumer companies trade at 3x–6x. Technology and asset-light businesses often trade at 10x–30x+ book because most of their value is in intellectual property, brand, and software — none of which appears on the balance sheet at full value. For value investing, a P/B below the sector average with improving return on equity is a positive signal.

Why do tech companies have such high P/B ratios?

Tech companies are primarily valued on earnings power, intellectual property, brand, and software — none of which shows up at fair market value on a GAAP balance sheet. A software company's most valuable asset (its codebase and customer relationships) is expensed immediately rather than capitalized, making book value very low relative to economic value. This is why P/B is most useful for asset-heavy sectors like banking, manufacturing, and real estate, and less useful for asset-light tech companies.

What is return on equity and how does it relate to P/B?

Return on equity (ROE) = net income / book value. A high ROE justifies a high P/B ratio — if a company generates 25% ROE, it creates $0.25 of earnings for every $1 of book value, which deserves a premium multiple. Low ROE with high P/B is a red flag. The most durable value investments combine low P/B with improving or stable ROE — they're buying high-quality assets at a reasonable price.

Price-to-Book (P/B) Ratio Calculator

Built and verified by Akshaya Panda · Last updated September 4, 2026

Calculate a stock's P/B ratio, see what premium or discount the market assigns relative to book value, and compute the Graham Number as a conservative fair value benchmark.

Stock Price ($)

Book Value Per Share ($) Total equity ÷ shares outstanding (found on balance sheet)

EPS ($) — for Graham Number Trailing twelve months EPS

Return on Equity (%) Net income ÷ book value (annual)

Sector

Price-to-Book Ratio

—

Book Value Per Share

—

Accounting net asset value

Premium to Book

—

Market price vs book value

vs Sector Avg (P/B)

—

Graham Number & Fair Value Context

Graham Number

—

√(22.5 × EPS × BVPS)

ROE-Implied Fair P/B

—

ROE ÷ required return (10%)

—

What Is the Price-to-Book Ratio?

The price-to-book (P/B) ratio compares a stock's market price to the company's accounting book value per share. Book value is what shareholders would theoretically receive if the company were liquidated — total assets minus total liabilities, divided by shares outstanding. A P/B of 2.0 means the market values the company at twice its accounting net worth.

P/B is especially useful for asset-heavy businesses — banks, insurance companies, industrial manufacturers, and real estate companies — where the balance sheet accurately reflects much of the business value. It's less useful for asset-light companies (software, consulting, brand-driven consumer businesses) where most of the value resides in intellectual property, brand, and customer relationships that don't appear on a GAAP balance sheet at market value.

The Graham Number: A Conservative Fair Value Benchmark

Benjamin Graham — Warren Buffett's mentor and the father of value investing — developed a formula combining P/E and P/B into a single conservative fair value estimate:

Graham Number = √(22.5 × EPS × Book Value Per Share)

The 22.5 comes from Graham's rule that a stock's P/E should not exceed 15x and its P/B should not exceed 1.5x — and 15 × 1.5 = 22.5. A stock trading below its Graham Number may be undervalued in Graham's framework; above it suggests a premium to conservative fair value. Graham designed this for defensive investors — it deliberately ignores growth potential and is a floor estimate, not a target price.

P/B Ratio by Sector

Sector	Typical P/B Range	Why
Technology	8–20x+	Intangible assets (IP, software) not fully on balance sheet
Consumer Discretionary	4–8x	Brand premium over tangible assets
Healthcare	3–6x	R&D pipeline value not fully captured in book
Industrials	3–6x	Mix of tangible assets + brand premium
Utilities	1.5–2.5x	Regulated returns; asset-heavy but earnings-limited
Energy	1.5–3x	Commodity sensitivity; depleting assets
Financials / Banks	1–2x	Book value closely tracks economic value; regulatory capital

ROE justifies P/B. A company earning 25% ROE (return on equity) is generating $0.25 of earnings for every $1 of book value. That high return on assets deserves a high P/B multiple. A quick sanity check: if you require a 10% annual return and the company earns 20% ROE, a fair P/B is roughly 2.0x (20%/10%). A company earning 5% ROE deserves a P/B near 0.5x — below book is reasonable. High P/B + high ROE = quality; high P/B + low ROE = overvaluation risk.

Use the P/B ratio alongside P/E for a fuller picture. A stock that looks cheap on P/E might have a balance sheet loaded with goodwill from overpriced acquisitions, making book value unreliable. Use the P/E ratio calculator to check earnings-based valuation, and the EPS growth calculator to model how future earnings growth changes the picture. For a complete framework on interpreting all three together, see the stock analysis guide.

Frequently Asked Questions

What does a P/B ratio below 1.0 mean?

P/B below 1.0 means the market values the company at less than its accounting book value. This can signal undervaluation — or that book value overstates real asset quality (goodwill from overpriced acquisitions, inventory that has depreciated). For banks, P/B below 1.0 often signals concerns about loan quality or return on equity. Always investigate why the P/B is low.

What is a good P/B ratio?

Depends entirely on sector. Banks at 1–2x P/B can be fairly valued; tech companies at 15x P/B can also be fairly valued if they earn high returns on equity. The most useful benchmark is the sector average and the company's ROE. High ROE justifies high P/B — if the company generates 25% ROE consistently, the market should value it well above book.

What is the Graham Number?

Graham Number = √(22.5 × EPS × BVPS). Developed by Benjamin Graham, it's a conservative fair value estimate combining P/E (capped at 15x) and P/B (capped at 1.5x). Stocks below their Graham Number may be undervalued in Graham's framework. It works best for stable, profitable companies — not high-growth tech or unprofitable startups.

Why do tech companies have high P/B ratios?

Software, IP, and brand value are not fully reflected in GAAP book value. A software company's codebase (worth billions) is expensed immediately rather than capitalized. So book value dramatically understates economic value, making P/B appear high — but correctly so. P/B is most informative for asset-heavy sectors where book value closely tracks replacement cost.

How do I find book value per share?

Book value per share = total stockholders' equity ÷ diluted shares outstanding. Both are on the balance sheet in the company's 10-K or 10-Q filings. Financial data sites (Morningstar, Macrotrends, Yahoo Finance) also list it directly as BVPS in the balance sheet section. Use the most recent quarter's figure for the most current data.

How we build our calculators

Sources & method

This calculator implements the price-to-book ratio — standard financial mathematics that no single body maintains as an official standard. The formula is shown on this page so you can verify it.

Not financial or tax advice. This is an educational estimator. It does not know your full situation, and tax rules change. Akshaya Panda, who builds and verifies these tools, is an engineer — not a financial adviser, accountant, or tax professional. Before acting on a result that matters, check it with someone licensed to advise you.