The P/E-P/B Gap

The P/E-P/B Gap: spotting price anomalies

The P/E-P/B gap is a simple way to spot when a stock looks expensive on earnings but still reasonable on assets, or the other way around. For a value investor, this gap is useful because it often reveals a market misunderstanding: is growth already priced in, or is the company’s quality being overlooked?

Why compare P/E and P/B

P/E and P/B tell different stories.

P/E shows how much the market pays for 1 dollar of earnings. P/B shows how much the market pays for 1 dollar of book equity.

Pour aller plus loin, utilisez notre calculateur de valeur intrinsèque pour estimer une fourchette de valeur sur un ticker, et parcourez les autres articles du blog ainsi que la page Définition pour approfondir les concepts d'investissement de valeur.