P/B Ratio
Similar to the P/E Ratio, a lot of investors use the P/B (Price to Book) Ratio to determine the value of a stock. The P/B can also be a useful calculation in finance but it should not be the single reason why you buy or sell a stock.
Here is why the P/B ratio is misleading…
A low P/B ratio could mean the stock is undervalued. However, it could also mean something is wrong with the company.
The P/B ratio varies by industry. A low P/B for one industry may be a high P/B for another industry. It’s hard to compare wise investments vs poor investments with ambiguous ratings.
As stated by Intestopedia.com “It is difficult to pinpoint a specific numeric value of a good P/B ratio.”
Also keep in mind the P/B ratio is 4 data points and 2 calculations. If you read why the P/E ratio is misleading, you can see that Tykr uses over 50 data points.
If you want to Buy and Sell stocks with confidence, we welcome you to join Tykr for free!