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What book value is, how to use the PB ratio, and book value vs market value — a complete guide.
Published by The Retail Trader · AUG 02, 2026 · Features
What book value is, how to use the PB ratio, and book value vs market value — a complete guide.
Book value = a company's net worth per share — that is, how much each shareholder would receive if the company shut down today.
Book Value = (Total Assets - Total Liabilities) / Total Shares
Keep these four points in mind:
• What it is — Book Value: Accounting value, Market Value: Market price
• Decided by — Book Value: Financial statements, Market Value: Demand/supply
• Changes — Book Value: Quarterly, Market Value: Real-time
• Use — Book Value: Fundamental analysis, Market Value: Trading
Keep these six points in mind:
• PB Ratio = Market Price / Book Value
• Example:
• Market Price: ₹500
• Book Value: ₹250
• PB Ratio: 2.0
Keep these four points in mind:
• < 1 — Undervalued (trading below book value)
• 1-2 — Fair value
• 2-3 — Slightly overvalued
• > 3 — Overvalued (unless high ROE)
Keep these five points in mind:
• Banking — 1.5-2.5
• IT — 5-10
• FMCG — 8-15
• Infrastructure — 1-3
• PSU — 0.5-1.5
Good For:
• Banking stocks (asset-based)
• Capital-intensive industries
• Comparing similar companies
Not Good For:
• IT companies (asset-light)
• FMCG (brand value not in book)
• Service companies
Keep these points in mind:
• 📌 BOOK VALUE
• 📊 Net worth per share
• 📊 (Assets - Liabilities) / Shares
• PB RATIO:
• 📊 Market Price / Book Value
• 📊 < 1 → Undervalued
• 📊 1-2 → Fair value
• 📊 > 3 → Overvalued
• PB BY SECTOR:
• 📊 Banking: 1.5-2.5
• 📊 IT: 5-10
• 📊 FMCG: 8-15
• 📊 PSU: 0.5-1.5
• USE PB FOR:
• ✅ Banking stocks
• ✅ Capital-intensive industries
• ✅ Comparing similar companies
• DON'T USE PB FOR:
• ❌ IT companies (asset-light)
• ❌ FMCG (brand value)
• ❌ Service companies
Keep these points in mind:
• What Is the PE Ratio? | How to Analyze a Stock | Value Investing
The Retail Trader — educational market analysis. Not investment advice.
This article is for educational purposes only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advisory. Rules, rates and mechanics of the exchanges, SEBI and RBI change from time to time, so verify every number yourself with your broker or an official source.