How do you calculate the P/B ratio?

P/B = Market capitalisation ÷ Book value of equity. Or, per share: P/B = Share price ÷ Book value per share. Book value per share = (Total assets − Total liabilities) ÷ Number of shares outstanding.

Price-to-Book (P/B) Ratio: Formula and Use

Q: What is the Price-to-Book ratio?

The Price-to-Book ratio (P/B) compares a company's market capitalisation to its book value of equity (the net value of its assets minus its liabilities). A P/B of 1 means the company is worth on the market exactly what its net assets are worth. A P/B below 1 can indicate undervaluation or a structural problem.

Q: Which P/B is attractive for a small cap?

A P/B below 1 means the company is worth less on the market than its net assets — theoretically a discount. But beware: a low P/B can mean the assets are not very profitable or are impaired. On Euronext Growth, a P/B between 0.8 and 1.5 with an ROE above 10% is an attractive combination.

Q: What is the difference between P/B and the P/E?

The P/E relates the share price to net income — it measures how much investors pay for €1 of annual profit. The P/B relates the share price to book value — it measures how much investors pay for €1 of net assets. The P/B is useful for asset-heavy sectors (real estate, banks, industry); the P/E for service activities and growth companies.

Q: Is the P/B reliable for European small caps?

The P/B is imperfect for small caps because accounting standards (local GAAP or IFRS) can understate intangible assets (brands, patents, know-how). A services company or a software publisher will have a naturally high P/B, not because it is overvalued, but because its real capital is in its teams and its technology — not on its balance sheet. Combine the P/B with the ROE for a more reliable read.

Definition of the Price-to-Book ratio

The Price-to-Book ratio (P/B), also called the price-to-book-value ratio (P/BV), measures the premium the market assigns to a company's net assets:

P/B = Market capitalisation ÷ Book value of equity

Or, equivalently, per share:

P/B = Share price ÷ (Equity ÷ Number of shares)

The book value of equity represents the net value of the company according to its balance sheet: total assets minus total liabilities. It is what shareholders would theoretically recover if the company were liquidated today at the book value of its assets.

A worked example
An industrial small cap has €50M of equity and 12 million shares outstanding. Its book value per share is €4.17. If the price is €5.50, its P/B is 5.50 / 4.17 = 1.32× — the market is paying 32% more than book value.

P/B calculator

🧮 Price-to-Book calculator

Current price (€)

Total equity (€k)

Number of shares (thousands)

ROE (net income / equity, %)

0× 1× 2× 4× 8×+

Book value / share €4.17

P/B ratio 1.32×

Market capitalisation €66M

P/B justified by ROE 1.20×

Verdict ⚠️ Slight premium

Interpreting the P/B: the ROE rule

A low P/B does not automatically mean a stock is cheap. The real question is: is this P/B justified by the company's profitability?

The theoretical relationship between P/B and ROE is:

Justified P/B ≈ ROE ÷ Cost of equity

If ROE = 15% and cost of equity = 10% → justified P/B = 1.5×
If ROE = 8% and cost of equity = 10% → justified P/B = 0.8× (a discount is normal)
If ROE = 20% → a high premium is consistent

That is why a P/B of 0.7 can indicate an opportunity (decent ROE but a pessimistic market) or a value trap (low ROE and depreciating assets). Always cross-check with the ROE.

P/B by sector on Euronext Growth

P/B levels vary considerably depending on the nature of the assets. A SaaS software publisher should not be compared to an industrial company:

Sector	Median P/B	Reasonable range	Comment
Industrials / Manufacturing	1.2×	0.7 – 2.0×	Significant tangible assets
Professional services	2.0×	1.2 – 3.5×	Human capital not on the balance sheet
Tech / SaaS	4.5×	2.0 – 10×	Intangible assets dominate
Healthcare / Medtech	3.0×	1.5 – 6×	R&D often not capitalised
Retail / Consumer	1.0×	0.5 – 2.0×	Thin margins, tangible assets
Listed real estate	0.85×	0.5 – 1.2×	NAV = main reference

The P/B < 1 trap on small caps
A P/B below 1 on Euronext Growth is often a sign that the company is destroying value — the market expects the assets to be worth less tomorrow than today. Always check how equity has evolved over 5 years before concluding there is a discount.

Limitations of the P/B on European small caps

The P/B has important blind spots you need to know before using it:

Unrecorded intangible assets: brands, patents, customer relationships, know-how — none of this appears on the balance sheet under local GAAP for small caps
"Inflated" goodwill: conversely, past acquisitions can record significant goodwill that overstates equity without reflecting any real value
Currency effects on foreign subsidiaries: distort the equity of groups with international operations
Asset write-downs: a devalued plant or inventory can artificially reduce equity, giving a misleadingly high P/B

Valuation score across 800+ small caps

The screener incorporates P/B, EV/EBITDA and a normalised P/E into the Valuation pillar. Filtering by sector available.

Open the screener →

New to screening European small caps? See the European small-cap stock screener guide and the glossary.

Frequently asked questions

What is the Price-to-Book ratio?▾

The P/B ratio compares a company's market capitalisation to its book value of equity. A P/B of 1 means the company is worth on the market exactly what its net assets are worth. A P/B below 1 can indicate undervaluation or a structural problem.

How do you calculate the P/B?▾

P/B = Market capitalisation ÷ Book value of equity. Per share: P/B = Price ÷ (Equity ÷ Number of shares). Book value per share = (Total assets − Total liabilities) ÷ Number of shares.

Which P/B is attractive for a small cap?▾

A P/B below 1 is theoretically a discount. But a low P/B can also mean the assets are not very profitable. On Euronext Growth, a P/B between 0.8 and 1.5 with an ROE above 10% is an attractive combination.

What is the difference between P/B and the P/E?▾

The P/E relates the share price to net income. The P/B relates the share price to book value. The P/B is useful for asset-heavy sectors; the P/E for service activities and growth companies.

Is the P/B reliable for European small caps?▾

Imperfect, because local GAAP understates intangible assets. A software publisher will have a naturally high P/B not because it is overvalued, but because its capital is in its teams — not on its balance sheet. Always combine P/B and ROE.