What should be the price of a company's equity shares be? The price -to book(P/B) is an effective way for investors to find undervalued companies if their goal is to find high-growth companies selling at low growth prices. The P/ B ratio can also assist investors in identifying and avoiding companies that overvalue. However, this ratio has its limitations, and in some cases, it may not be the most appropriate metric for determining value.

The Price to Book (P/B) ratio is a financial metric that compares a company’s market value to its book value. Market value is calculated by multiplying the current share price by the number of outstanding shares, while book value represents the company’s net assets recorded on its balance sheet. The P/B ratio shows how much investors are willing to pay for each dollar of a company’s assets. A ratio above 1 suggests the market values the company higher than its net assets, often due to growth potential or strong earnings. A ratio below 1 may indicate undervaluation or financial challenges. Investors use P/B to evaluate whether a stock is fairly priced, especially in asset-heavy industries like banking and manufacturing.