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Part 5 · Comparing companies with financial ratios · Lesson 24

PBR and BPS: share price relative to assets

If P/E is the price put on earnings, P/B is the price put on a company's book assets. We start from equity on the balance sheet and read through to what a P/B of 1x means.

14 min readLesson 24 / 37As of: example companies are fictional · Market P/B figures are from reports and studies citing Korea Exchange data (end of 2024; May 22, 2025 and 2026) · Checked 2026-10-08✓ Read

QToday's question

Is a company with a P/B of 0.5x on a "half-price sale"?

If the assets on the books are worth KRW 10,000 but the stock market sells them for KRW 5,000, it looks like half price. But why did the market put the company on the shelf at half price? In this lesson we calculate the book assets carried in one share (BPS), read how many times that the share price is (P/B), and see what the 1x baseline tells us.

MAPLearning map for this lesson

We build it up in three steps. At the end of each step, a 'Quick check' lets you test your understanding before moving on.

Before you start

In Lesson 6 you learned assets = liabilities + equity, and in Lesson 9 that Robin Bakery's KRW 6.0 billion of equity is made up of share capital, capital surplus and retained earnings. In Lesson 11 we split consolidated equity into the parent's share and non-controlling interests, in Lesson 16 we calculated a P/E of 15x, and in the lesson just before this one, Lesson 23, an ROE of 20%. Also recall "P/B = P/E × ROE" and the Korea discount from Learn (Economics) Lesson 37.

  1. STEP 1 · Basic conceptsCalculating BPS and P/B

    Calculate from equity and share count and from price and BPS, and explain why it equals market cap ÷ equity.

  2. STEP 2 · Understanding the mechanismP/B = P/E × ROE, and what 1x means

    Understand how P/B is determined by the relationship between ROE and the required return, and judge whether a P/B below 1x means "cheap" or "weak earning power."

  3. STEP 3 · Applying itFinding BPS in DART and reading market P/B

    Find equity attributable to owners of the parent and the share count in the annual report, calculate BPS, and interpret changes in KOSPI P/B.

Building knowledge105 concepts so far · 5 added in this lesson

Part 1 · Getting to know DART 23 ✓
The five financial statementsPhoto (balance sheet) vs video (income statement and cash flow)Net income → retained earningsEnding cash = balance sheet cashRobin Bakery example companyDisclosure: to all investors at the same timeDART (FSS electronic disclosure system)10 filing typesPeriodic vs timely disclosureDART and KIND3 DART search criteria (company name, period, filing type)Periodic disclosure → annual report filterFinal version and correction markersDocument table of contents and III. Financial MattersChecking table units and fiscal terms3 periodic reports (annual, semi-annual, quarterly)Filing deadlines: 90 days and 45 daysAudit and reviewPreliminary earnings → audit report → annual reportThe 12 chapters of an annual reportBusiness Overview and Financial MattersManagement Discussion and AnalysisThe 10-minute skim order
Part 2 · Balance sheet 27 ✓
Assets = liabilities + equityOther people's money vs your ownA transaction moves both sidesCurrent vs non-current (1-year line)Speed of turning into cashTrade receivables · inventoriesPP&E and depreciationDays sales outstandingCurrent vs non-current liabilities (1-year line)Interest-bearing debt (borrowings, bonds)Operating liabilities (trade payables, advances received)Lease liabilities · provisionsInterest expense and rate sensitivityEquity = assets − liabilities (shareholders' share)Share capital · capital surplus · retained earningsRetained earnings = opening + net income − dividendsCapital impairment ratio = (share capital − total equity) ÷ share capitalAdministrative issue (50%) · delisting (full impairment)Debt-to-equity ratio = liabilities ÷ equityCurrent ratio · quick ratio (ability to repay within a year)Borrowings to total assets and interest coverage ratioComparing with the industry averageConsolidated (whole group) vs separate (one company)Eliminating intercompany transactions and investment sharesNon-controlling interestEPS and ROE on the owners' shareHolding companies: read consolidated and separate together
Part 3 · Income statement 24 ✓
Income statement = a record of one year (a period)Five-step staircase of profitCost of goods sold vs SG&ARevenue = price × quantityGross margin · cost of sales ratioAmplifying effect of cost changesPricing power and pass-throughOperating profit = revenue − cost of goods sold − SG&AOperating marginFixed cost · variable costOperating leverageNon-operating income/expense (interest, translation, equity method, disposals)Pre-tax income and income taxFiltering out one-off gainsEarnings qualityProfit attributable to owners of the parentEPS = profit attributable to owners ÷ weighted average sharesBasic EPS · diluted EPSShare cancellation and EPSTrailing P/E · forward P/EQoQ vs YoYSeasonalityThree-month, year-to-date and implied Q4Preliminary earnings and consensus
Part 4 · Cash flow statement 21 ✓
Cash flow statement = a year of bank-account recordsAccrual profit vs actual cashNon-cash expenses (depreciation)Opening cash + three sections = closing cashOperating · investing · financing sectionsIndirect method: net income + non-cash expenses − increase in working capitalWorking capital (assets up, cash down; liabilities up, cash up)Reading company type from the sign patternFree cash flow (FCF)FCF yieldDividend coverageExpansion-driven vs weak-operations negative FCFInsolvency despite profitsWorking capital increaseGap between profit and cashA structure held up by debtAccruals (net income − operating cash flow)Operating cash flow ratioReceivables and inventory growth vs salesInventory turnoverJudging from a 3+ year trend

Part 5 · Comparing companies with financial ratios

ROE = net income ÷ equityYear-end equity vs. average equityDuPont decomposition (margin × turnover × leverage)The risk of ROE built on debtP/B = P/E × ROEBPS = parent shareholders' equity ÷ number of sharesNEWP/B = share price ÷ BPS = P/E × ROENEWROE, required return and a P/B of 1xNEWAsset quality and adjusted BPSNEWTelling market P/B from a single stock's P/BNEW

STEP 1Calculating BPS and P/B

Equity, the bottom box of the balance sheet, is "what is left for shareholders after all debts are repaid." Divide that share by the number of shares and you get BPS; divide the share price by BPS and you get P/B.

BPS is the book assets carried in one share

(Book value Per Share) is the equity on the balance sheet divided by the number of shares. Since equity is net assets, assets minus liabilities, BPS is "the wealth left for one share, going by the books." Robin Bakery (fictional) has equity of KRW 6 billion and 2 million shares, so BPS is KRW 6 billion ÷ 2 million shares = KRW 3,000.

For a company with subsidiaries, the numerator is not total consolidated equity but only . This is the same reason that in Lesson 16 the numerator of EPS was net income attributable to the parent's shareholders. In the Robin Coffee scenario in Lesson 11, you subtract KRW 240 million of from consolidated equity of KRW 6.3 billion and use the parent's share of KRW 6.06 billion, so BPS comes to about KRW 3,030.

P/B is a multiple put on book assets

(Price-to-Book Ratio) is the stock price divided by BPS. Robin Bakery's stock price is KRW 9,000, so P/B is KRW 9,000 ÷ KRW 3,000 = 3x. That means the market is paying three times the wealth recorded on the books to buy this company. You get the same result calculating for the whole company instead of per share: of KRW 18 billion (KRW 9,000 × 2 million shares) divided by equity of KRW 6 billion is also 3x.

To compare it with a second-hand shop, BPS is the price written in the ledger, and the share price is the price a customer is actually willing to pay. If customers want to pay more than the ledger value, it is because they think the item can earn money well. If they want to pay less, it is because they think the item is not as useful as the ledger value or earns poorly.

BPS = equity attributable to owners of the parent ÷ number of shares · P/B = share price ÷ BPS = market cap ÷ equityRobin Bakery (fictional): KRW 6.0 billion ÷ 2 million shares = KRW 3,000 · KRW 9,000 ÷ KRW 3,000 = 3x

BPS grows as the company keeps profits

In Lesson 9, retained earnings moved as opening KRW 2.6 billion + net income KRW 1.2 billion − dividends KRW 300 million = closing KRW 3.5 billion. Equity grew by the KRW 900 million of earnings the company kept rather than paying out, and BPS grew by that much too. Conversely, if the company has a loss or buys back and cancels its own shares, equity shrinks and BPS can fall. So BPS is not a number you look at once and finish; it is a number you follow to see how much it builds up each year.

Quick checkIf Robin Bakery again earns KRW 1.2 billion of net income next year and pays KRW 300 million in dividends, what is BPS at the end of next year? If the share price stays at KRW 9,000, what is P/B?
BPS is KRW 3,450 and P/B is about 2.6x. Equity becomes KRW 6.0 billion + 1.2 billion − 0.3 billion = KRW 6.9 billion, and KRW 6.9 billion ÷ 2 million shares = KRW 3,450. KRW 9,000 ÷ KRW 3,450 ≈ 2.6x. Even if the share price stays the same, P/B falls on its own as the company accumulates profit.

STEP 2P/B = P/E × ROE, and what 1x means

Is a P/B of 3x expensive? One number alone cannot tell you. Split P/B into two pieces and you can see what the market is pricing.

P/B is P/E times ROE

Unpacked a little, P/B is price ÷ BPS = (price ÷ EPS) × (EPS ÷ BPS). The first bracket is the from Lesson 16, and the second bracket is one share's earnings divided by one share's equity, which is the from Lesson 23. For Robin Bakery, P/E 15x × ROE 20% = P/B 3x. Even with the same P/B of 3x, a company with ROE of 10% and P/E of 30x and a company with ROE of 30% and P/E of 10x tell completely different stories. In the former, high market expectations pushed P/B up; in the latter, it was the ability to earn well on equity.

P/B = P/E × ROERobin Bakery (fictional): 15x × 20% = 3x · With the same ROE, the higher the P/B, the higher the P/E too

The 1x baseline: ROE and required return

When shareholders entrust their money, they expect a return of "at least this much." This is called the . It is the same idea as the discount rate in Learn (Economics) Lesson 17. If a company earns more on its equity than the required return (ROE > required return), each won on the books creates more than a won of value, so P/B tends to exceed 1x. Conversely, if ROE is below the required return, each won on the books fails to earn even a won, so P/B tends to fall below 1x.

Written with the simple formula from Learn (Economics) Lesson 37, fair P/B ≈ (ROE − g) ÷ (r − g). Here r is the required return and g is the long-run growth rate of earnings. Plugging in Robin Bakery's ROE of 20% with r of 10% and g of 5% gives (20 − 5) ÷ (10 − 5) = 3x, the same as the P/B the market has set now. If ROE drops to 8%, the same r and g give (8 − 5) ÷ (10 − 5) = 0.6x. The book assets are unchanged, but once earning power weakens, the "fair" value falls below 1x.

See it in a figure: the P/B scale

Calculate the market's P/B from share price and BPS (black pin), and the simple-formula P/B from ROE, required return and growth (blue pin). Tap a preset to compare which side of the 1x line the two pins land on.

KRW 9,000
KRW 3,000
20%
10%
5%
Market P/B (price ÷ BPS)Simple-formula P/BBelow 1xScale 0–7x
Market P/B3.0x
P/E that comes with it15.0x
Simple-formula P/B3.0x
Share price at that P/BKRW 9,000

This is a simplification for teaching. The simple formula assumes ROE and growth stay constant for a long time, so it should not be applied as is to real companies. Robin Bakery, Dark Cloud Electronics and the other two companies are all fictional. Dark Cloud Electronics is assumed to have equity of KRW 5.0 billion, 10 million shares (BPS KRW 5,000) and a share price of KRW 2,500.

Three things a P/B below 1x can mean

A P/B below 1x means the stock trades for less than its book wealth, but there are three broad reasons. First, weak earning power. Like "Dark Cloud Electronics" in the figure above, if ROE falls short of the required return, the market does not give full credit for book value. Such a company may look cheap but stay cheap, a . Second, book values that are hard to trust. If assets contain a lot of hard-to-sell inventory or assets of uncertain value, the market marks the books down. Third, when the market believes the money the company earns does not reach shareholders. If a company just piles up profits and is passive about dividends or share cancellation, or if governance may shrink minority shareholders' share, the market puts a lower value on the same earnings. The , discussed for a long time in the Korean market, is tied to this third reason.

In theory, the money shareholders would receive if the company were wound up now, assets sold and debts repaid, is called . People sometimes say that a P/B below 1x is "cheaper than liquidation value," but in reality, selling assets in a hurry rarely recovers full book value, and winding up costs money too. So a P/B of 1x is not a line that guarantees a floor; it is a line where interpretation begins.

Asset quality: discounting the books and looking again

BPS assumes that every asset on the books is worth its book value. But values wobble for assets such as , which arises when you buy another company at a high price, such as development costs, and inventory that has not sold for a long time. If you want to be conservative, remove these assets and recalculate BPS. This is commonly called . For Robin Bakery, it works out as follows.

Books as they areBPS KRW 3,000
Equity KRW 6.0 billion ÷ 2 million shares · P/B 3.0x
Excluding KRW 400 million of intangible assetsBPS KRW 2,800
Equity KRW 5.6 billion ÷ 2 million shares · P/B about 3.2x
Also discounting KRW 200 million of KRW 900 million inventoryBPS KRW 2,700
Equity KRW 5.4 billion ÷ 2 million shares · P/B about 3.3x

Robin Bakery's numbers are the fictional figures shared across the course. The KRW 200 million inventory discount assumes "if there is old inventory."

Even when discounted, Robin Bakery's BPS does not shrink much, because most of its assets are bread-baking equipment, cash and trade receivables. By contrast, for a company whose goodwill is larger than its equity, adjusted BPS falls a lot, and a company that looked like "P/B 0.8x" could land well above 1x once the books are discounted.

Common misconceptions

“A P/B below 1x is always cheap?”
No. If ROE is below the required return, a P/B under 1x may actually be the “fair” price. To call it cheap, you also need a reason ROE will improve or evidence that the book assets are worth at least their book value.
“A high P/B is a bubble?”
Companies with a high ROE also show a high P/B. Robin Bakery's 3x is the result of P/E 15x × ROE 20%. You need to separate whether a high P/B is explained by a high ROE or only by a high P/E (expectations).
“BPS is what you get per share if the company goes under?”
It is just a number on the books. The more trouble a company is in, the more its assets sell for less than book value, and assets like goodwill may leave almost nothing.
Quick checkIf a company has a P/B of 0.6x and a P/E of 10x, what is its ROE? If the required return is 10%, how should this P/B be read?
ROE is 6%. P/B = P/E × ROE, so ROE = 0.6 ÷ 10 = 6%. Because the earnings fall short of the 10% that shareholders want, you can read it as trading below 1x for that reason. To call this company cheap, first look for a reason ROE will rise.

STEP 3Finding BPS in DART and reading market P/B

Brokerage apps show P/B right away, but calculating it yourself shows which equity and which share count produced that number. Then we read how P/B for the whole market has moved.

Finding it yourself in DART: equity and share count

Companies often do not state BPS separately, so you find two numbers and divide them yourself. Open the annual report you opened in Lesson 3 again.

  • 1Open III. Financial Matters → 2. Consolidated Financial Statements → 2-1. Consolidated Statement of Financial Position. It is the same table you saw in Lesson 6.
  • 2In the equity section, find the equity attributable to owners of the parent line. Leave out non-controlling interests and use this line as the numerator. Be sure to check the unit (millions of won, etc.).
  • 3I. Company Overview → 4. : check the number of issued shares and treasury shares. Usually you divide by "issued shares − treasury shares," that is, shares outstanding.
  • 4For a company with preferred shares, BPS differs a little depending on how you count shares. When the numbers differ between brokerage apps, this difference is often the cause.

Section names were checked on 2026-10-08 against the table of contents of Samsung Electronics' annual report filed on 2025.03.11 (rcpNo 20250311001085). This is an example of finding your way around and not a stock recommendation.

Divide the share price by the BPS you found this way and you get that day's P/B. Equity changes every quarter, so using equity from the latest quarterly report gives a BPS "closer to now." Also remember, as in Lesson 4, that quarterly reports are reviewed, not audited, numbers.

See it in a figure: two scenes of market P/B

The first tab shows market P/B by country at end-2024, and the second shows how KOSPI P/B moved after that. Tap a bar to see an explanation. The vertical line is 1x.

Looking at the two scenes together reveals something interesting. At the end of 2024, the KOSPI P/B was 0.9x, far lower than the US (4.8x), Taiwan (2.6x) and Japan (1.5x). The government announced the in February 2024, and the KOSPI P/B rose to 1.35x at the end of 2025 and 2.40x on May 22, 2026. Yet on that same day, 523 of the 808 KOSPI stocks (excluding preferred shares), or 64.73%, still had a P/B below 1x. This is because the market P/B is heavily influenced by large-cap companies. According to reports at the time, the top two semiconductor companies by market cap accounted for 48% of the KOSPI's market cap. The market-wide number and your own stock's number need to be read separately.

The Korea Exchange said it would publish low-P/B companies by market and sector for the first time on Nov 2, 2026, and would defer publication for one year for companies that disclose a corporate value-up plan containing a P/B improvement plan by Oct 22. By the end of September, a cumulative 764 listed companies had disclosed corporate value-up plans. In the plans that low-P/B companies put out, there are really two things to look for: how they will raise ROE, and how they will return the money they earn to shareholders. The latter leads to dividends in the next lesson.

How to use it in investing

When you see numbers like thisTry reading them like this
P/B 0.5x, ROE 3%Earning power falls far short of the required return. Rather than cheap, first check in Chapter II of the annual report why it earns so little
P/B 0.5x, ROE 12%A low value relative to earning power. Check whether there are other reasons such as the quality of book assets, shareholder return policy or governance
P/B 5x, ROE 25%A case where a high P/B is explained by a high ROE. Check the multi-year trend to see how many years that ROE can last
P/B 5x, ROE 5%It means P/E is 100x. Almost all of it is expectations of future growth, so it shakes a lot when expectations weaken
BPS falls every yearCheck the statement of changes in equity (Lesson 9) to see whether it is due to losses, large dividends or cancellations, or asset impairment
A low-P/B company disclosed a value-up planCheck whether the ROE target and shareholder return methods are written in numbers, and whether it kept its previous plan

Not always. P/B is watched closely in industries where equity is the raw material of the business, such as banks and insurers, but for software and service companies with little equipment or book assets, P/B naturally comes out high and carries little meaning. Market P/B figures can differ by compiler and reference date. This lesson does not recommend buying or selling any particular stock.

Quick checkA company has equity attributable to owners of the parent of KRW 50 billion, 11 million shares issued and 1 million treasury shares. If the share price is KRW 4,000, what are BPS and P/B?
BPS is KRW 5,000 and P/B is 0.8x. Shares outstanding are 11 million − 1 million = 10 million, and KRW 50 billion ÷ 10 million shares = KRW 5,000. KRW 4,000 ÷ KRW 5,000 = 0.8x. Now it's time to check ROE and work out whether 0.8x is because it is "cheap" or because "earning power is weak."

✓What we learned today

  • BPS = equity attributable to owners of the parent ÷ number of shares. Robin Bakery (fictional) is KRW 6.0 billion ÷ 2 million shares = KRW 3,000.
  • P/B = share price ÷ BPS = market cap ÷ equity. Robin Bakery is KRW 9,000 ÷ KRW 3,000 = 3x, and market cap of KRW 18.0 billion ÷ equity of KRW 6.0 billion is also 3x.
  • P/B = P/E × ROE. 15x × 20% = 3x. Even for the same P/B, you need to separate whether it is because the multiple put on earnings (P/E) is high or because the company earns well on its equity (ROE).
  • In general, when ROE is higher than the return shareholders want, P/B exceeds 1x, and when it is lower, P/B falls below 1x. So a P/B below 1x may be a signal of "weak ability to earn on equity" before it is a signal of "cheap."
  • Not every asset on the books is worth its book value. If assets whose value can swing, such as goodwill, intangible assets and old inventory, are large, recalculate BPS conservatively.
Continues in the next lesson · Lesson 25Dividend metrics: payout ratio and dividend yield

How much BPS will grow each year depends on how much of net income the company keeps and how much it pays out to shareholders. In the next lesson we read that "paid-out share," dividends, through the payout ratio and dividend yield, and open the "Dividends" section of DART ourselves.

Quiz5-question quiz

Pick an answer and it's graded right away with an explanation.

Q1. With Robin Bakery's (fictional) equity of KRW 6.0 billion, 2 million shares and a share price of KRW 9,000, what are BPS and P/B?

Q2. What is the P/E of a company with a P/B of 3x and an ROE of 20%?

Q3. All else equal, which company's P/B is likely to fall below 1x?

Q4. When calculating BPS for a company with consolidated financial statements, what do you use as the numerator?

Q5. On May 22, 2026, KOSPI P/B was 2.40x, but about 65% of KOSPI stocks had a P/B below 1x. What is the best interpretation?

NextTerms · Next lesson · Related tools

BPS (Book value Per Share)Book value Per Share

The company's net assets (assets − liabilities) divided by the number of shares outstanding. Dividing the share price by BPS gives PBR.

P/BPrice-to-Book Ratio

Share price ÷ book value per share (BPS). It shows how many times the company's book net assets the stock trades at.

P/EPrice-Earnings Ratio

Share price ÷ EPS. A multiple showing how many times one year's earnings the market pays for a share. It varies greatly with interest rates and investor sentiment.

ROE (Return on Equity)Return on Equity

Net income divided by net assets (equity), showing how much shareholders' money earns in a year. The relationship PBR = PER × ROE links the two multiples.

EquityEquity

The shareholders' share, assets minus liabilities, in other words your own money. It consists of share capital, capital surplus, retained earnings and so on.

Equity attributable to owners of the parentEquity attributable to owners of the parent

The part of consolidated equity on the balance sheet that goes to shareholders of the parent company. It is the value with non-controlling interests removed, and is used when calculating BPS and ROE.

Non-controlling interestNon-controlling interest

The part of equity in a subsidiary that is not attributable to the parent (K-IFRS No. 1110). It is shown separately in consolidated equity and consolidated net income.

Market capitalizationMarket capitalization

Stock price × number of shares issued. The price the market puts on the whole company.

Required returnRequired return

The minimum return an investor expects when putting money into an asset. For stocks it is roughly the Treasury yield plus a risk premium, and is used as the discount rate that converts future earnings to present value.

Liquidation valueLiquidation value

The money left for shareholders if the company were wound up now, assets sold and debts repaid. In practice, a hurried asset sale makes it hard to receive full book value, so it tends to be less than book equity.

GoodwillGoodwill

The premium paid over the net assets of an acquired company, recorded as an asset. It is a kind of intangible asset, and if the acquired business does not earn as expected, it is reduced through an impairment loss.

Adjusted BPSAdjusted book value per share

Book value per share recalculated after removing or discounting assets whose value can swing, such as goodwill, intangible assets and old inventory. It is used to look at the books conservatively (there is no set formula).

Intangible assetsIntangible assets

Assets with no physical form that still earn money, such as trademarks, patents, software and goodwill.

Value trapValue trap

A case where P/E and P/B look cheap, but earnings are going to fall or profitability is low, so the low multiple is justified. It often appears at the earnings peak of cyclical industries.

Korea discountKorea discount

The phenomenon of Korean listed companies receiving lower P/E and P/B than overseas companies with similar earnings and assets. Low shareholder returns, governance and geopolitical risk are cited as reasons.

Corporate Value-up ProgramCorporate Value-up Program

A government plan announced in February 2024 to support improving corporate value. It encourages listed companies to disclose plans to improve P/B and ROE, and publishes comparisons of P/B, P/E and ROE by market.

Total number of shares, etc.Total number of shares

An item in 'I. Company Overview' of the annual report that lists the total number of shares authorized, issued shares, treasury shares and shares outstanding, by common and preferred shares. It is where you check the denominator of BPS and EPS.

This is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.