Price-to-Book (P/B) ratio is particularly useful for cyclical stocks — but only when combined with cycle awareness. A low P/B at the wrong point in the cycle can be a value trap.
Cyclical stocks look cheapest on P/B at cycle peaks (high earnings inflate book value) and most expensive at cycle troughs (losses erode book value). This is the opposite of what you want. A copper miner at 0.5x P/B during a copper price crash is often a BUY — the same stock at 2x P/B during a copper boom (like today at $12,043/t) is not cheap just because it was at 3x last year.
Use P/B for cyclicals only in combination with the underlying commodity signal. Freeport-McMoRan at 0.5x P/B when copper is at $4,600 (BUY signal) = genuine value. Freeport at 1.5x P/B when copper is at $11,750 (SELL signal) = value trap risk.
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