Unlock stock picks and a broker-level newsfeed that powers Wall Street.

Zacks
Zacks.com featured highlights Centene, Pediatrix Medical, Pfizer, StoneCo and Banco Santander
Zacks Equity Research
7 min read

In This Article:

For Immediate Release

Chicago, IL – May 1, 2025 – The stocks in this week’s article are Centene Corp. CNC, Pediatrix Medical Group MD, Pfizer PFE, StoneCo STNE and Banco Santander SAN.

Boost Your Portfolio with These 5 Low Price-to-Book Stocks

When considering valuation metrics, the price-to-earnings (P/E) ratio has always been the obvious choice as calculations based on earnings are easy and come in handy. However, in the case of companies that are incurring losses or are in an early cycle of development, generating meager or no profits, price-to-sales (P/S) is a good valuation metric to identify cheap stocks.

Other than P/E and P/S, the price-to-book ratio (P/B ratio) is also an easy-to-use tool for zeroing in on low-priced stocks that have high-growth prospects.

The P/B ratio is used to calculate how much an investor needs to pay for each dollar of the book value of a stock. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.

The P/B ratio helps identify low-priced stocks with high growth prospects. Centene Corp., Pediatrix Medical Group, Pfizer, StoneCo and Banco Santander are some such stocks.

Now, let us understand the concept of book value.

What is Book Value?

There are several ways by which book value can be defined. Book value is the total value that would be left over, according to the company’s balance sheet, if it goes bankrupt immediately. In other words, this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities.

It is calculated by subtracting total liabilities from the total assets of a company. In most cases, this equates to common stockholders’ equity on the balance sheet. However, depending on the company’s balance sheet, intangible assets should also be subtracted from the total assets to determine book value.

Understanding P/B Ratio

By comparing the book value of equity to its market price, we get an idea of whether a company is under- or overpriced. However, like P/E or P/S ratio, it is always better to compare P/B ratios within industries.

A P/B ratio of less than one means that the stock is trading at less than its book value or the stock is undervalued and, therefore, a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive.

For example, a stock with a P/B ratio of 2 means that we pay $2 for every $1 of book value. Thus, the higher the P/B, the more expensive the stock.

But there is a warning. A P/B ratio of less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated. In such a case, the stock should be shunned because it may be destroying shareholder value. Conversely, the stock’s price may be significantly high — thereby pushing the P/B ratio to more than one — in the likely case that it has become a takeover target, a good enough reason to own the stock.

Terms and Privacy Policy
Your Privacy Choices
Utah Privacy Notice
More Info

Recommended Stories