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The PBV is a financial ratio that is used to compare a company's book value to its current market price. Book value denotes the portion of the company held by shareholders.
Formula:
PBV = Market Capitalization / Total Book Value as per the Balance Sheet
Or
PBV = Market Value per Share / Book Value per Share
Book Value per Share = Total Book Value / Total No. of outstanding shares
A point to note here is that, PBV ratios do not directly provide us any information on the company's ability to generate profits for itself or its shareholders. It gives us some idea of whether an investor is paying too much for what would be left if the company were to go bankrupt immediately.
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Why do you use Price-to-book value ratio for analyzing a bank?
Its fun.
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