PB Full Form in Share Market

What is the Full Form of PB in the Share Market?

The PB’s full form in the share market is the Price Book Ratio. It is the ratio between the market value of the shares of the company against the book value of its equity. The book value of the equity is calculated from the value of the assets of the company, given in the balance sheet. Investors will make use of the PB ratio to ascertain if the value of the stock is calculated appropriately.

Importance of PB Ratio Analysis:

If the stocks of the company have a high P/B ratio, then it suggests that the stock could be overvalued and vice verse. Analysis of the Price Book Ratio is important as it helps the investors to find the undervalued stocks of the company. Some investors also consider this to be a forward metric that reflects on the future cash flows of the company.

Limitations of the P/B ratio:

Many investors find the P/B ratio to be a useful metric, as it serves as a stable and intuitive metric that could easily compare to the market price. But, when the accounting standards that the firms follow vary, we may not be able to compare the P/B ratios. This is especially true for companies from different countries.