Skip to main content
ValuationP/TBV

What is Price-to-Tangible-Book (P/TBV)?

P/TBV is a stricter version of Price-to-Book that excludes intangible assets and goodwill from the denominator. It shows what investors pay per dollar of hard, tangible assets. Benjamin Graham favored P/TBV below 1.5 as a value signal. It is especially relevant for banks and financial companies where intangibles can distort book value.

Formula

P/TBV = Market Cap / (Total Equity - Intangible Assets - Goodwill)

Why Tangible Book Matters for Bank Valuation

For financial institutions, tangible book value is arguably the most important anchor for intrinsic value. Banks hold mostly financial assets -- loans, securities, deposits -- that have reliable market values. Intangibles from acquisitions (customer lists, core deposit intangibles, goodwill) can be impaired rapidly in a downturn, making P/TBV the preferred measure for stress-testing what a bank is worth at the floor.

Benjamin Graham required P/TBV below 1.5 as a necessary (though not sufficient) condition for a value purchase. A ratio below 1.0 implies the market values the company at less than the hard assets on its books -- a potential margin of safety if the assets are correctly stated and the business is not in terminal decline.

Explore the Price-to-Book Ratio

P/B is the broader cousin of P/TBV. Read our glossary entry on Price-to-Book Ratio to understand when to use each and how they relate to intrinsic value.

Read P/B Ratio Definition →

Frequently Asked Questions

What is P/TBV and how does it differ from P/B?+
P/B uses total book value (total equity) in the denominator. P/TBV strips out intangible assets and goodwill for a more conservative measure. Intangibles -- brand names, patents, customer relationships -- are notoriously difficult to value and may be worthless in a liquidation. P/TBV focuses on the hard, balance-sheet assets that have real recoverable value: cash, receivables, inventory, and fixed assets.
What is a good P/TBV ratio?+
Below 1.0 means you are buying tangible assets at a discount to their book value -- a classic Graham margin of safety signal. Banks typically trade at 0.8x-1.5x tangible book value depending on return on equity and credit quality. Below 0.8x is very cheap for a bank and may indicate either a turnaround opportunity or serious credit concerns. Above 2.0x implies a significant intangibles or earnings premium.
When should I use P/TBV over P/B?+
P/TBV is most useful for asset-heavy companies like banks, insurance firms, and REITs where intangibles are minimal and tangible assets are the primary value driver. It is also the preferred screen for deep value investors who want hard asset backing and a liquidation floor. For companies where goodwill is a large portion of book value (common after acquisitions), P/TBV removes the potential distortion.
Why is P/TBV less useful for software companies?+
Software companies have almost no tangible assets -- their value lives in code, brand, and customer relationships, all of which are intangible. Removing those from the denominator leaves near-zero tangible equity, making P/TBV astronomically high and practically meaningless. For software and other knowledge businesses, metrics like EV/EBITDA, P/FCF, or revenue multiples are far more relevant than book-value-based ratios.

Related Terms

Price-to-Book Ratio

Market price vs total net asset value

Enterprise Value

Total acquisition cost including debt

Return on Equity

Profit generated per dollar of equity

Invested Capital

Total capital deployed by owners and lenders

Explore More

Investing Tools

Free Calculators

Learn

← Back to Glossary

Weekly Stock Analysis - Free

5 undervalued stocks, fully modeled. Every Monday. No spam.

Cookie Preferences

We use cookies to analyze site usage and improve your experience. You can accept all, reject all, or customize your preferences.