The formula
How to calculate price to book
Price to book compares what the market charges for a share against the accounting value of the net assets behind it. It is the classic value screen, and it works best where the balance sheet genuinely reflects the business.
Book value is an accounting construct: assets at historic cost less depreciation, minus liabilities. For a bank or an insurer that is close to economic reality; for a software company whose main asset is its engineers, it is not.
What to enter:
- Share price
- Book value per share — shareholders' equity divided by shares in issue
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
Some of the fields above will accept figures that seem unusual for your own situation, and that is deliberate: the formula behind price to book works the same way regardless of scale, so the calculator does not stop you testing a hypothetical scenario a long way from your actual numbers — often the fastest way to see which input the result is most sensitive to.
Why price to book matters
Most people who look up a price to book calculation already have a specific number in mind — a quote, an offer, a target — and want to check it rather than learn the theory behind it. This page is built for that: enter your own figures, see the result immediately, and change any field to see how the answer moves without redoing the arithmetic from scratch each time.
Beyond a one-off check, the same calculation is worth revisiting whenever the underlying numbers change — a new interest rate, a change in income, a different term. Because the figures live in the page's own web address, coming back to update just one field and compare the new result against the old one takes seconds rather than starting again from a blank page.
This kind of calculation rarely stands entirely alone. A price to book figure usually feeds into a wider decision — how it compares with a competing offer, whether it fits inside a monthly budget, what it does to a longer-term plan — and the value of having it as an exact number rather than a rough guess is that those follow-on comparisons stop being guesswork too. Once one figure in a decision is precise, it is worth making the effort to get the others precise as well, rather than mixing an exact calculation with several estimates and treating the result as equally reliable.
A calculator like this one is often bookmarked and returned to repeatedly over months rather than used once, particularly for anything tied to an ongoing plan such as a mortgage, a savings goal or an investment being tracked. Because the figures live in the web address rather than only in memory, coming back to the same page with updated numbers is quicker than starting from a blank spreadsheet each time.
Worked example
Work through the defaults on this page:
- Share price: 42
- Book value per share: 28
That gives:
- Price to book: 1.5 ×
- Premium to net assets: 50 %
- Net assets per £1 of price: 0.67
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
Below 1 the market values the company at less than its stated net assets, which either signals distress or a genuine mispricing. Above 3 the value sits mostly in things the balance sheet does not carry — brand, code, customer relationships.
Where this goes wrong. Applying it to asset-light businesses. Companies with heavy intangibles, large buybacks or big goodwill write-offs can show a distorted or even negative book value, and the ratio stops meaning anything.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
No. It often means the market expects the assets to earn a poor return, or to be written down. Pair it with return on equity: low P/B plus decent ROE is interesting, low P/B plus falling ROE usually is not.
Because their assets are mostly financial instruments carried close to market value, so book value approximates what the business is genuinely worth. For most other sectors, earnings and cash flow multiples say more.
The answer it gives you is price to book. With 42 share price and 28 book value per share, that comes to 1.5 ×. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.