Market To Book
Market-to-book ratio (also price-to-book) compares a company's market value to its book value. Book value is total assets minus liabilities. A ratio below 1 means the stock trades below the accounting value of its net assets, potentially indicating undervaluation.
Understanding the Concept
• Formula: Market Cap / (Total Assets - Total Liabilities) • Below 1: may be undervalued or have troubled assets • Above 1: market values intangibles, growth, or brand • Most useful for asset-heavy industries (banks, REITs)
Real-World Example
A bank has $100B in assets, $90B in liabilities, and a $5B market cap. Book value is $10B, so price-to-book is 0.5. The market values the bank at half its accounting equity, suggesting investors worry about loan quality. A healthy bank might trade at 1.0-1.5x book value.
How Strykr Helps
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