ROE is the first indicator of the P/B ratio. Here are some P/B-ROE(ttm) combinations observed in February 2025, in descending order of P/B. Â If the required return is 10%, you see that many line up: A P/B = 1.0 has an ROE of about 10%, a P/B > 1.0 has an ROE greater than 10%, and P/B <Â 1.0 has an ROE less than 10%.
Some are out of line. But don’t take that as a trading strategy without further investigation; it’s future ROE and growth in ROE…and the risk to ROE… that determines P/B. Current ROE is only a cue to look further; it can be due to one-time effects on earnings. That said, current ROE is typically a good indicator of future ROE.
| Firm | P/B | ROE |
|---|---|---|
| Meta Platforms (META) | 10.0 | 36.12% |
| Kinsale Capital Group (KNSL) | 7.8 | 34.7% |
| Deere & Company (DE) | 5.7 | 35.5% |
| Constellation Brands (STZ) | 3.7 | 8.3% |
| Tenet Healthcare (THC) | 3.4 | 59.56% |
| Kosmos Energy (KOS) | 1.3 | 19.86% |
| Customers Bankcorp (CUBI) | 1.0 | 10.44% |
| Archer-Midland-Daniel (ADM) | 1.0 | 10.75% |
| Ally Financial (ALLY) | 1.0 | 6.42% |
| Lloyds Banking Group (LYC) | 0.8 | 10.96% |
| Ford Motor Company (F) | 0.8 | 7.99% |
| Citigroup (C) | 0.8 | 3.87% |
| General Motors (GM) | 0.7 | 14.17% |
| Deutsche Bank (DBK.DE) | 0.5 | 6.12% |
| Goodyear Tire & Rubber (GT) | 0.5 | -6.12% |
