Price to Book Value

How to read it

stockrow divides the stock price by book value per share, where book value per share is total common equity from the latest quarter divided by the weighted basic share count from the latest quarter. The ratio rises when the price rises or when common equity shrinks — through losses, write-downs, dividends or buybacks — and falls when the price drops or equity grows. It is worked out for every trading day, from the latest reported figures on or before that day, so it moves daily with the price and steps when a new quarter is reported.

What is typical

Asset-heavy businesses whose balance sheets closely reflect what they own, such as banks, insurers and industrial companies, tend to trade nearer their book value. Software, brand and service businesses, whose value lies in assets the balance sheet barely records, tend to trade at much higher multiples. Compare the ratio with the median for the company’s sector.

Pitfalls

stockrow shows the value as zero when the result is negative, so a zero usually means common equity is negative, not that the shares are free. Large buybacks can shrink equity and inflate the ratio without anything changing in the business. Quarterly and annual values are the daily value on the first trading day on or after each period end, not an average over the period.