Formula
PBR = market cap ÷ net assets (equity) = price ÷ book value per share (BPS)
For example, if a company with net assets of KRW 500 billion has a market cap of KRW 500 billion, its PBR is 1.
Definition
PBR (price to book ratio) is market cap divided by net assets (equity). Net assets are what remains on the books for shareholders after all liabilities are subtracted from total assets. PBR shows how many times the net assets recorded on the company's books the market is currently valuing the company at.
A PBR of 1 means market cap equals book net assets. Below 1, the market price falls short of even book value; above 1, the market is adding a premium on top of the assets on the books.
Where PER looks at the price relative to earnings, PBR looks at the price relative to accumulated assets. That makes it especially common for companies where PER is hard to use because earnings swing or are negative, and for businesses whose value rests on assets, such as banks, insurers and holding companies. Jupick also classifies PBR as a valuation metric and shows it separately from the overall grade.
How to read it
Traditionally, a PBR below 1 is read as trading below book value. The arithmetic says that if the company were liquidated today, with its assets disposed of and its debts repaid, more than the current share price would be left. That is why a PBR of 1 is often cited as a psychological reference line.
PBR varies widely by sector, though. Manufacturing and finance, with many tangible assets such as plants and real estate, tend to have low PBRs, while IT and consumer companies, whose value lies largely in intangibles such as brands, technology and people that barely show up on the books, tend to have high PBRs.
Reading it with ROE adds depth. A company that earns well on its equity (high ROE) naturally receives a high PBR, while a high PBR with a low ROE can mean expectations are running ahead of results.
PBR across the market now
The values that fall at each point when the stocks Jupick covers are lined up by PBR, smallest to largest. Positions in the line are used instead of an average because a few unusually large values can drag a single average a long way.
KoreaBased on 198 stocks
| Lowest 25% | Middle | Highest 25% |
|---|---|---|
| 0.79x | 1.93x | 5.82x |
Smallest value 0.13x, largest value 986.95x
Of the major Korean stocks, only 198 made it into this table. Left out: 2 stocks with no value from the source.
OverseasBased on 180 stocks
| Lowest 25% | Middle | Highest 25% |
|---|---|---|
| 2.56x | 5.12x | 10.92x |
Smallest value 1.10x, largest value 313.45x
Of the major overseas stocks, only 180 made it into this table. Left out: 19 stocks with no valid PBR because equity is negative.
Stocks are rarely left out at random. Companies for which a metric does not hold, or for which the source gives no value, tend to be the ones in weaker shape, so the stocks left in the table are the ones in better condition. The middle value of such a table leans to the favorable side compared with the whole market, and the more stocks are left out, the more it leans.
How to read each range
- Lowest 25%
- The quarter where the market price is lowest relative to the net assets on the books. Stocks below 1 tend to cluster here. Asset-heavy manufacturers and financial companies land here for structural reasons, so reading this band as a sign of mispricing without checking the sector goes wrong.
- Middle half
- The price relative to net assets is in the common range for the market. The band mixes companies that turn their assets into profit and companies that do not, and looking at ROE alongside separates the two.
- Highest 25%
- The quarter where the market puts the highest value on net assets. Companies with large value that the books do not capture, such as brands and technology, tend to gather here. The multiple can also rise because accumulated losses have shrunk net assets, so it helps to check what is happening in the denominator too.
The two values at either end of the table above are the boundaries that split the stocks into three groups. What it means to belong to each group is written above.
Two stocks that fall just either side of a boundary have practically the same value. Being in different groups does not by itself make them different. The boundaries are drawn again from each day’s sample, so a company can change groups even when nothing about it has changed.
Lowest and highest describe the order of size only, not good or bad. The data is updated once a day.
Stocks with a low PBR now
- 1CLOTTE CHEMICAL CORPORATION0.13x
- 2BHANWHA CORP0.14x
- 3CLOTTE SHOPPING CO.,LTD.0.16x
- 4CHYUNDAI STEEL COMPANY0.20x
- 5CCJ Corp.0.21x
Stocks on Jupick's watchlist with a PBR value, sorted from the lowest.
Points to watch
- A low PBR does not always mean the stock is priced too low. When the assets are actually worth less than their book value (impaired inventory, receivables that are hard to collect and so on), or the company cannot earn a profit from those assets, the market may be assigning a low PBR on purpose.
- Book value is based on acquisition cost, so it can differ from current market value. Land acquired at a low price long ago is understated on the books and makes PBR look higher than it really is, while obsolete equipment can be overstated on the books.
- When net assets change sharply, through share repurchases and cancellations or large accumulated losses, PBR swings widely too.