Ch.10 · Risk Measures and Ratios · medium
What is 'price-to-book ratio' (P/B) in equity analysis?
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EXPLANATION
P/B ratio = Market Price / Book Value Per Share. Book value is the net asset value of a company per share (assets minus liabilities). P/B < 1 may indicate a stock trading below its asset value (potentially undervalued). P/B is particularly important for financial sector stocks (banks, NBFCs) where asset values are meaningful. Value funds target low P/B stocks.
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