What is the book-to-market ratio?

The book-to-market (B/M) ratio divides a company's book value of equity by its market capitalization. A ratio above 1 means the market values the company below its accounting book value (classic value territory); below 1 means the market prices in growth expectations beyond book value.

How is book-to-market different from price-to-book?

Price-to-book (P/B) is the reciprocal: market cap ÷ book equity. A P/B of 0.8 equals a B/M of 1.25. Both convey the same information; academic finance (Fama-French) uses B/M, while practitioners more often quote P/B.

What counts as a "high" B/M ratio?

There is no universal cutoff, but Fama and French typically sorted the top 30% of B/M as "value" and the bottom 30% as "growth." Ratios above 1.0 are generally considered value-oriented; below 0.5 lean growth. Context (industry, macro environment) matters significantly.

Can the ratio be negative?

Yes. If a company has negative book equity (accumulated losses exceed paid-in capital), the B/M ratio is negative. This is common in leveraged buyouts or firms with large share buybacks. A negative B/M is not meaningful for value classification.

What book value figure should I use?

Use total shareholders' equity from the most recent balance sheet. Some analysts exclude intangibles or goodwill to get "tangible book value," which tends to produce higher B/M ratios and may better reflect liquidation value.

Book-to-Market Ratio Calculator

Name: Book-to-Market Ratio Calculator
Availability: InStock
Author: Nham Vu

Enter book value of equity and market cap to get the B/M ratio and a value vs. growth interpretation.

Inputs

Book Value of Equity

Total shareholders' equity from the balance sheet.

Market Capitalization

Share price × total shares outstanding.

Quick Examples

B/M Benchmarks

B/M Range	Classification	Equivalent P/B
< 0	Negative book equity	N/A
0 – 0.30	High growth	P/B > 3.3×
0.30 – 0.75	Growth	P/B 1.3×–3.3×
0.75 – 1.25	Neutral / blend	P/B 0.8×–1.3×
1.25 – 2.0	Value	P/B 0.5×–0.8×
> 2.0	Deep value	P/B < 0.5×

Summary

Enter book value of equity and market cap to get the B/M ratio and a value vs. growth interpretation.

How it works

Retrieve the book value of equity from the company's balance sheet (shareholders' equity line).
Calculate or look up market capitalization (current share price × total shares outstanding).
Divide book equity by market cap to get the B/M ratio.
Compare the result against benchmarks: >1.0 = value, 0.5–1.0 = moderate, <0.5 = growth.

Use cases

Screen stocks for value investing using the Fama-French three-factor model.
Compare a company's intrinsic book value against market sentiment.
Identify potentially undervalued stocks trading below book value.
Understand growth-vs-value tilt when constructing an equity portfolio.
Quick sanity check before a deeper fundamental analysis.
Academic finance exercises on asset pricing and factor models.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu

Book-to-Market Ratio Calculator

Inputs