Valuation ratios explained: P/E, P/B, EV/EBITDA

A valuation ratio compares a share's price to something fundamental — earnings, book value, cash profit. A number on its own means little; it only helps next to the company's own history or its peers.

Updated 9 September 2026

A company’s share price tells you what one share costs. It says nothing about whether that is cheap or expensive — a ₹50 share can be dearer than a ₹5,000 one. Valuation ratios put the price next to a fundamental number so you can compare across companies.

Price-to-Earnings (P/E)

P/E = share price ÷ earnings per share (EPS). If a share is ₹200 and the company earned ₹10 per share last year, the P/E is 20 — you are paying ₹20 for every ₹1 of annual profit. A higher P/E means the market expects profits to grow faster (or the stock is simply expensive). Compare a company’s P/E to:

its own P/E over the last 5–10 years;
the P/E of similar companies in the same industry;
the broader market’s P/E.

On a loss-making company the P/E is not meaningful — there are no earnings to divide by. Platform labels it “not meaningful” rather than showing a misleading number.

Price-to-Book (P/B)

P/B = share price ÷ book value per share, where book value is the company’s net assets (what it owns minus what it owes) per share. A P/B below 1 means the market values the company at less than its stated net assets. P/B is most useful for banks, NBFCs and asset-heavy businesses; it means little for asset-light service or software companies.

EV/EBITDA

Enterprise Value ÷ EBITDA. Enterprise value is the market value of the equity plus net debt — what it would cost to buy the whole business. EBITDA is earnings before interest, tax, depreciation and amortisation, a rough measure of operating cash profit. EV/EBITDA lets you compare companies with different debt levels and tax situations more fairly than P/E. It is “not meaningful” when EBITDA is negative.

Dividend yield

Dividend per share ÷ share price, as a percentage. A 3% yield means you receive ₹3 a year in dividends for every ₹100 invested at today’s price. A very high yield can signal either a genuinely cash-generative company or a falling share price that has not yet been matched by a dividend cut.

The limits of ratios

Ratios are backward-looking — they use last year’s (or the trailing twelve months’) numbers.
A “cheap” ratio can stay cheap for years if the business is not growing.
Accounting choices, one-off items and different year-ends make cross-company comparison imperfect.
No ratio tells you what the price will do next.

Platform shows these ratios on each stock page, labelled with their source and date, and marks any ratio that is not meaningful. They are information, not a recommendation.