The Price-to-Book ratio of a company is a valuation method that measures the value of a company by comparing its revenue against the total value of a company. The ‘book’ element of this ratio is the Net Asset Value (NAV) of the company whilst the price element is the total valuation of a company, calculated either by the latest round of funding in an unlisted company or the price of share in listed firms.
In early stage companies, the Price-to-Book is typically higher than those of more developed companies due to investors pricing in expectations of future growth.
When using this ratio, as with all valuation ratios, it is important the calculated Price-to-Book ratio is used to compare companies within the same sector and industry for the most insightful comparisons.
If the company you are researching is offering a an equity stake that runs past two decimal point or you need a more exact calculation that is not available on the above calculator, you can use a version of the above calculator that replaces the ‘equity offered’ slider.