Deep Dive: Price-to-Book Ratio — How to Use P/B to Find Undervalued Stocks
When Warren Buffett bought shares of Berkshire Hathaway in the 1960s, he was buying a struggling textile mill trading below the value of its physical assets. That purchase — driven by a simple comparison of price to book value — launched one of the greatest investing careers in history. Six decades later, the price-to-book ratio remains one of the most widely used tools in fundamental analysis, helping investors distinguish between stocks trading at a discount to their net asset value and those commanding a premium. The P/B ratio strips away the noise of earnings estimates and revenue projections to ask a more elemental question: what would you get if the company liquidated today? In February 2026, with the Supreme Court striking down certain reciprocal tariffs and trade policy uncertainty still roiling markets, asset-based valuations offer a grounding perspective. A company's book value doesn't swing with tariff headlines the way earnings forecasts do — making P/B a useful anchor when market sentiment shifts rapidly. But like any single metric, the price-to-book ratio has blind spots. Apple trades at nearly 46 times book value while Citigroup hovers around 1.0x. That doesn't make Apple overvalued or Citigroup a bargain — it means the ratio tells different stories depending on the industry, business model, and what a company's balance sheet actually captures. Understanding when P/B works, when it misleads, and how to combine it with other tools is what separates informed investors from those chasing simple screens.