P/B Ratio (Price-to-Book Ratio)
How the P/B ratio compares share price with book value per share, with a Company A worked example in RM and notes on its limits.
What is P/B Ratio (Price-to-Book Ratio)?
The P/B ratio compares a company’s share price with its book value per share, which is shareholders’ equity divided by shares in issue. A ratio of 1.0 means the price equals book value. It suits asset-heavy businesses such as banks and property developers more than companies whose value is intangible.
How it is calculated
Divide the share price by book value per share. Book value is total shareholders’ equity, meaning assets minus liabilities from the balance sheet, divided by shares outstanding.
P/B ratio = Share price ÷ (Total shareholders’ equity ÷ Shares outstanding)
How Malaysian investors use it
Banks, plantation estates and property developers on Bursa often carry much of their value on the balance sheet. Compare within a sector, using the latest quarterly report.
Worked example: Company A
Hypothetical Company A:
| Item | Figure |
|---|---|
| Shareholders’ equity | RM480 million |
| Shares outstanding | 400 million |
| Book value per share | RM1.20 |
| Share price | RM2.40 |
| P/B ratio | 2.0 times |
The market values each ringgit of Company A’s net assets at RM2. Whether that is reasonable depends on the return those assets earn, which is what ROE measures.
Common mistakes
- Treating a low P/B as a bargain without checking whether assets are impaired.
- Ignoring intangibles such as brands, which book value may miss.
- Comparing P/B across sectors with very different asset structures.
Related terms
- Balance sheet: where equity and total assets are reported.
- Return on equity: the return that equity base produces.
- Debt-to-equity: how much borrowing sits behind the equity.
Where Finworld shows it
Finworld Software’s financial statements section includes P/B among its ratios, on annual, quarterly and trailing 12-month views.
Frequently asked questions
Is a P/B ratio below 1 a bargain?
Not automatically. It can mean the market doubts the stated asset values, or that the company earns poorly on them.
Why does P/B suit banks better than software firms?
Banks carry most of their value on the balance sheet, while many software firms’ value lies in intangibles that book value often leaves out.
Does book value include intangibles?
Only what is recorded in equity. Purchased goodwill may be included, while internally built brands usually are not.
See how this fits into Finworld Software, or book a demo.
Finworld provides market education and research tools only. This is not investment advice. Market data is end-of-day.
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