Price to tangible book ratio

A ratio compares the price the market puts on a stock to something the company actually produces, its earnings, its assets, or its cash flow. It tells you how expensive a stock is relative to that measure, not just whether the share price is high or low in absolute terms.

Price to tangible book divides market cap by tangible book value, or share price by tangible book value per share. It plays the same role as the price to book ratio, but tangible book value has already stripped out goodwill and other intangible assets before the ratio is taken, making it a more conservative measure than plain price to book, especially for companies that have grown through acquisitions and carry large amounts of goodwill on the balance sheet as a result.

The formula is:

P/TBV is a standard real world metric for asset-heavy or acquisitive companies, especially financials and banks, where the balance sheet closely reflects what the business is actually worth. Like price to book, it's far less meaningful for asset-light businesses whose value comes mainly from brand, software, or talent rather than physical assets, since none of that ever shows up as tangible book value on the balance sheet.