A valuation ratio comparing a stock's market price to its book value per share, calculated by dividing share price by book value per share. It measures how much premium investors pay above the company's accounting net worth.
Combines 'price' (Latin 'pretium') with 'book' referring to accounting book value (from Old English 'boc'). The ratio gained prominence during the 1930s Depression when investors focused on asset-based valuations, popularized further by Benjamin Graham's value investing approach.
P/B ratio reveals the market's trust in management - a ratio below 1.0 suggests investors think the company is worth less than its stated net assets, often signaling either a great bargain or serious operational problems! Tech companies often have sky-high P/B ratios because their real value lies in intangible assets like software and brands.
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