PBR and BPS: share price relative to assets

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

BPS (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 equity attributable to owners of the parent. 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 non-controlling interest 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

P/B (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: market capitalization 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 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.

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 P/E from Lesson 16, and the second bracket is one share's earnings divided by one share's equity, which is the ROE 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.

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 required return. 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.

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 value trap. 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 Korea discount, 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 liquidation value. 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 goodwill, which arises when you buy another company at a high price, intangible assets 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 adjusted BPS. For Robin Bakery, it works out as follows.

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.

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. Total number of shares: 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 Corporate Value-up support measures 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

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.