Another common analytical calculation is the price-to-book (P/B) ratio.
This is popular among value investors.
While price-to-earnings considers a company’s future earnings potential as a way to determine share price, P/B incorporates what the company owns.
Not a ratio that I find very useful, but many others do, so you shall not suffer for my biases.
We will cover how to calculate and use P/B ratios, followed by limitations in the ratio’s effectiveness. Then I will show you how to make the P/B ratio a little more practical. (more…)
