Definition

Price to book is a company's market cap valuation compared to its book value.

Calculation

Price to Book Ratio = Market Price per Share/Book Value per Share

Why is this important?

Value investors tend to favor the price to book ratio in order to identify companies that are undervalued. Companies with a price to book value less than 1.0 are often considered undervalued by value investors.  Warren Buffett is famous for the Price to Book ratio when choosing investments.