The correct answer is: B. banks
The price-to-book ratio (P/B ratio) is a valuation ratio that compares a company’s market price per share to its book value per share. The P/B ratio is a measure of how much investors are willing to pay for a company’s stock relative to its book value.
Book value is the value of a company’s assets minus its liabilities. It is calculated by taking the company’s total assets and subtracting its total liabilities.
The P/B ratio is often used to compare the valuation of different companies in the same industry. A high P/B ratio indicates that investors are willing to pay a premium for a company’s stock, while a low P/B ratio indicates that investors are not willing to pay a premium for a company’s stock.
The P/B ratio can also be used to compare the valuation of a company to its historical P/B ratio. A company with a P/B ratio that is significantly higher than its historical P/B ratio may be overvalued, while a company with a P/B ratio that is significantly lower than its historical P/B ratio may be undervalued.
Banks are typically considered to be value stocks, which means that they are often undervalued by the market. This is because banks have a lot of assets that are not easily valued, such as their loan portfolio. As a result, the P/B ratio for banks is often lower than the P/B ratio for other types of companies.
High-tech companies, on the other hand, are typically considered to be growth stocks. This is because high-tech companies are often growing at a faster rate than other types of companies. As a result, the P/B ratio for high-tech companies is often higher than the P/B ratio for other types of companies.
Utilities and service companies are typically considered to be defensive stocks. This is because utilities and service companies are less sensitive to changes in the economy than other types of companies. As a result, the P/B ratio for utilities and service companies is often lower than the P/B ratio for other types of companies.