Term · Business Model & Operating KPIs
Book-to-bill ratio
In briefThe book-to-bill ratio compares order intake in a period with revenue; values above 1 point to a growing order backlog. For project-driven small caps it serves as a leading indicator of growth or slowdown.
Definition
The ratio of order intake to revenue in a period. Values above 1 indicate that the order backlog tends to be growing.
How it is calculated
Formula. Book-to-bill = order intake ÷ revenue.
Why it matters for small caps
For smaller listed companies with project-based business, the book-to-bill ratio is a leading indicator of growth or slowdown.
Common misreadings
- A high value is overvalued when orders carry low margins or require long implementation times.
In the process
Frequently asked
What does the book-to-bill ratio tell you?
It measures whether more orders are coming in than are being worked off. A value above one means the order backlog tends to be increasing.
How is the book-to-bill ratio used?
You relate order intake and revenue of the same period in order to detect demand dynamics early. This is a useful signal, especially in project-based business.
Why is a high book-to-bill value not always positive?
Many new orders are of little use if they are low-margin or only implemented late. The quality and duration of the orders matter more than the metric alone.
Related terms
Sources
Primary
ESMA – Guidelines on Alternative Performance Measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
Methodology
IFRS Foundation – IFRS 15 Revenue from Contracts with Customers
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.