The Price-to-Book ratio (P/B) is a straightforward tool that compares a company’s stock price to its book value per share. It helps investors assess whether a stock is undervalued or overvalued based on its assets. A P/B ratio of 1.0 suggests fair value, above 1.0 indicates a premium, and below 1.0 may signal undervaluation. This metric is especially useful for evaluating asset-heavy industries like banking, real estate, and manufacturing.

Key Highlights:

• Formula: P/B Ratio = Market Price per Share ÷ Book Value per Share.
• Book Value per Share: (Total Assets – Total Liabilities) ÷ Outstanding Shares.
• Example: If a stock trades at S$16.55 with a book value of S$2.06, its P/B ratio is 8.0.
• Application in Singapore: Commonly used for SGX-listed banks (e.g., DBS, OCBC) and REITs due to their strong asset bases.
• Limitations: Doesn’t account for intangible assets or future earnings potential, making it less reliable for tech or service-based companies.

To get accurate results, always use the latest financial reports and compare P/B ratios within the same industry. Combine this metric with others like P/E ratios and dividend yields for a more balanced analysis.

How to Calculate the P/B Ratio Step by Step

The P/B Ratio Formula

The formula for the P/B ratio is simple: P/B Ratio = Market Price per Share ÷ Book Value per Share. This calculation compares the current share price to the book value per share.

• The market price per share represents the stock’s current trading price on the Singapore Exchange (SGX).
• The book value per share is calculated by dividing the company’s net assets by the total number of outstanding shares.

For example, if a company has a P/B ratio of 1.5, it means investors are paying S$1.50 for every S$1.00 of the company’s book value.

How to Calculate Book Value per Share

To calculate the P/B ratio, you first need the book value per share. Use the following formula:
Book Value per Share = (Total Assets – Total Liabilities) ÷ Outstanding Shares.

If the company has preferred shares, the formula becomes:
Book Value per Share = (Total Equity – Preferred Equity) ÷ Total Shares Outstanding.

For SGX-listed companies, you can find the required financial data in their annual reports or on the Singapore Exchange website under “Annual Reports & Related Documents”. Alternatively, check the company’s investor relations page.

Here’s an example: In September 2025, Singapore Exchange Limited (SGX:S68) reported total assets of S$4,144 million and total liabilities of S$1,944 million, with 1,069 million shares outstanding. Using the formula:
(S$4,144m – S$1,944m) ÷ 1,069m shares = S$2.06 per share.

To improve accuracy, consider using the average number of outstanding shares over a specific period. This method avoids distortions caused by events like stock issuances or major buybacks.

Finding Current and Accurate Data

Once you understand the formulas, the next step is ensuring you have the most up-to-date data. For the latest trading prices of Singapore stocks, visit the SGX website’s securities prices section or trusted financial platforms such as ShareInvestor.com.

To calculate the P/B ratio, download the company’s most recent annual report or interim financial statements from its SGX filings. Look for the Balance Sheet (or Statement of Financial Position) to find total assets and total liabilities. The number of outstanding shares is usually detailed in the equity section or the notes to the financial statements.

For example, as of 10th September 2025 at 5:13 PM SGT, StockAnalysis.com reported that Singapore Exchange Limited was trading at S$16.55. With a book value per share of S$2.06 for FY 2025 (ending 30th June 2025), the P/B ratio was approximately 8.0. This means investors were paying eight times the company’s book value.

Platforms like Yahoo Finance also provide quick access to book value per share figures. For Singapore Exchange Limited, Yahoo Finance listed the book value per share for the quarter ending 30th June 2025 as S$2.06, with a price-to-book ratio of 8.05.

Keep in mind that the book value per share is based on historical costs, whereas the market price reflects forward-looking expectations. Always ensure you’re using the latest data from the most recent quarter to get an accurate P/B ratio that aligns with the company’s current financial situation. Reliable data is key to making informed investment decisions.

How to Read P/B Ratio Results

What High and Low P/B Ratios Mean

A P/B ratio below 1.0 often suggests that investors are paying less than the company’s book value per share. This can point to undervaluation, but it might also signal deeper issues within the company.

On the other hand, high P/B ratios (above 3.0) reflect investor confidence in strong future growth or the belief that the company holds valuable intangible assets. For example, technology firms frequently have high P/B ratios because much of their value comes from intellectual property, brand strength, and growth potential rather than physical assets.

P/B ratios between 1.0 and 3.0 are generally seen as indicating fair valuation, though this can vary depending on the industry. For instance, banks and financial institutions, which own assets closely tied to market values, often trade within this range.

Extremely low P/B ratios (below 0.5) require closer examination. While they may present bargain opportunities, they can also hint at financial troubles, declining business performance, or even irregularities in accounting. Understanding these nuances helps investors assess whether a stock is undervalued or overvalued and provides a foundation for comparing it to others in the same industry.

P/B Ratio Limitations

While useful, the P/B ratio has its limitations, and these should not be overlooked. For one, book value is based on historical cost accounting, meaning assets are recorded at their original purchase price minus depreciation. This method can undervalue companies with appreciating assets, such as prime real estate.

Service-oriented businesses add another layer of complexity. Take a consulting firm, for example – it may have few physical assets but generate significant revenue through its workforce and expertise. This could result in a low book value and an inflated P/B ratio, which might not accurately reflect its actual worth.

Accounting practices also play a role in distorting P/B ratios. Differences in depreciation methods, asset revaluation policies, or how goodwill is treated can lead to varying book values, even among companies with similar fundamentals. Although Singapore follows International Financial Reporting Standards (IFRS), some differences in reporting still persist.

Market conditions heavily influence P/B ratios as well. In bull markets, optimism often drives up P/B ratios, while bear markets tend to compress them across industries. Additionally, the ratio does not account for future earnings potential. Companies investing heavily in innovation or R&D may show a lower book value now but could be positioning themselves for significant growth later. Similarly, companies undergoing restructuring or facing bankruptcy often exhibit very low P/B ratios. These factors highlight the importance of using industry-specific benchmarks when interpreting P/B ratios.

Comparing P/B Ratios Within Industries

To make better sense of P/B ratios, it’s crucial to consider the industry context. Ratios vary widely across sectors, and comparisons should be made within the same industry.

For example, banks typically trade at P/B ratios between 0.8 and 2.0 because their assets, such as loans and securities, closely align with current market values. Technology companies, in contrast, often show much higher P/B ratios due to their reliance on intangible assets and asset-light business models.

Real Estate Investment Trusts (REITs) listed on SGX generally maintain P/B ratios near 1.0 since property values are regularly updated to reflect market conditions. Manufacturing companies, depending on their asset intensity and growth potential, may trade between 1.5 and 3.0.

Retail companies show a diverse range of P/B ratios depending on their business models. Traditional retailers with large physical store networks and significant fixed assets often trade in the 1.0–2.0 range. Meanwhile, e-commerce platforms, which are more scalable and asset-light, usually command higher ratios, typically ranging from 3.0 to 6.0.

When analysing Singapore-listed companies, it’s essential to compare P/B ratios with industry peers rather than the broader market. A ratio that seems high in one sector might be perfectly reasonable in another. Additionally, understanding where the economy is in its cycle can help differentiate between temporary market trends and more fundamental changes in valuation.

Real-World Uses for the P/B Ratio

Now that we’ve covered how to calculate and interpret the P/B ratio, let’s explore how it can be applied practically to uncover value in the SGX market.

Finding Undervalued Stocks

For Singapore investors, the P/B ratio is a handy tool for spotting undervalued stocks on the SGX. A P/B ratio below 1.0 often points to potential undervaluation. Start by screening SGX-listed companies, especially those hitting 52-week lows. Sharp price drops can sometimes create temporary undervaluations, making these stocks worth a closer look. Once you’ve shortlisted potential candidates, calculating their P/B ratios helps determine if they are trading below their book value.

Take Singapore’s manufacturing sector as an example. Companies in this space often hold substantial physical assets – like machinery, property, and inventory – which can make their P/B ratios more meaningful. For instance, a manufacturer with a P/B ratio of 0.7 might appear undervalued. However, extremely low P/B figures should prompt further investigation to rule out deeper issues. Similarly, when it comes to REITs trading below book value, the drop might simply reflect temporary market pessimism rather than a long-term problem.

Analysing Financial Sector Stocks

The P/B ratio is particularly useful for evaluating Singapore’s banking and financial services sector. For banks, a P/B ratio near 1.0 often signals potential undervaluation. Comparing the ratios of peer banks can reveal anomalies – if one bank’s ratio is noticeably lower than others, it’s worth digging deeper to see if it’s an opportunity or if specific challenges are at play.

Insurance companies can also be assessed using the P/B ratio. An insurer with a P/B ratio below 1.0 might deserve closer examination to determine if concerns about claims or investment performance are temporary or indicative of larger issues. Singapore’s regulatory capital requirements add another layer of stability to financial institutions’ book values, making the P/B ratio even more reliable for this sector.

Using P/B Ratio with Other Metrics

While the P/B ratio is a valuable indicator, it works best when combined with other valuation metrics. Pairing it with the P/E ratio can sharpen your analysis – a low P/B ratio alongside a moderate P/E often signals genuine value, while a high P/E could hint at earnings concerns.

Dividend yield is another useful complement, especially for income-focused investors. For instance, a REIT on the SGX trading at a P/B ratio of 0.9 with a dividend yield of 6% might offer an appealing mix of asset value and steady income. Incorporating metrics like operating cash flow and Price-to-Sales (P/S) ratios can also add depth. A company trading below its book value while generating strong cash flow may be genuinely undervalued, whereas a high P/S ratio in an asset-light business might simply reflect its limited reliance on tangible assets.

Creating a simple scoring system that considers favourable P/B and P/E ratios, sustainable dividend yields, and healthy cash flows can help you identify attractive investment opportunities while avoiding the pitfalls of relying on a single metric. It’s also important to keep an eye on broader market trends and sector rotations, as companies with strong balance sheets and low P/B ratios often become more appealing during periods of economic uncertainty. Combining these approaches strengthens the P/B ratio’s role as a key component in systematic investment strategies.

For more detailed trading strategies and insights into valuation metrics like the P/B ratio, check out the resources available at Collin Seow Trading Academy.

P/B Ratio vs Other Valuation Metrics

Evaluating different valuation metrics can help Singapore traders gain a more nuanced understanding of a company’s financial standing. Each metric comes with its own strengths and weaknesses, making it critical to choose the right one for the specific sector or business model.

P/B Ratio Pros and Cons

The table above highlights how different metrics serve distinct purposes. For example, the P/B ratio is especially relevant for asset-heavy industries like Singapore’s banking sector. Take DBS Group, for instance – its P/B trends often reveal value opportunities, particularly when earnings-based metrics are less reliable.

On the other hand, the P/B ratio is less effective for firms in technology or service-oriented industries. Companies like Sea Limited, which derive much of their value from intangible assets such as digital platforms and e-commerce ecosystems, often have their worth underrepresented on the balance sheet. In these cases, the P/S ratio can provide better insight into growth prospects.

When to Use the P/B Ratio First

Knowing when to prioritise the P/B ratio can be a game-changer in your investment strategy. This metric proves particularly valuable in sectors where tangible assets play a central role in operations. For industries like financial services, real estate, and manufacturing – think of banks, insurance companies, or firms like City Developments Limited – the book value often serves as a reliable indicator of a company’s worth. In such cases, the P/B ratio may uncover value opportunities that other metrics might miss.

During market downturns, when earnings become unpredictable, the P/B ratio can offer a steadier lens through which to evaluate companies. For example, in manufacturing, where firms maintain large inventories and physical assets, focusing on book value can help identify undervalued stocks in turbulent economic conditions.

However, the P/B ratio is less useful for industries driven by intangible assets. For technology or service-based companies, starting with metrics like the P/S ratio – focused on growth potential – makes more sense. The P/B ratio can then serve as a secondary check to evaluate asset backing.

The key takeaway? Align the valuation metric with the company’s business model. Asset-heavy sectors benefit most from a P/B-first approach, while asset-light firms require a mix of metrics for a well-rounded analysis. This tailored method ensures you’re using the right tools to uncover value in diverse industries.

Key Points About Using the P/B Ratio

P/B Ratio Summary

The Price-to-Book (P/B) ratio is a tool used to measure a company’s valuation by comparing its market price per share to its book value per share. A P/B ratio below 1.0 often signals that a company might be undervalued, while a ratio above 1.0 could indicate high growth expectations or the presence of significant intangible assets.

This ratio is particularly useful in industries that rely heavily on physical assets, such as real estate, manufacturing, and banking.

However, the P/B ratio has its limitations. It doesn’t factor in growth potential and may undervalue companies with substantial intangible assets, like intellectual property or brand equity. These insights set the stage for practical trading strategies discussed below.

Trading Tips for P/B Ratio Use

Here’s how you can effectively incorporate the P/B ratio into your trading analysis:

• Combine Multiple Metrics: Use the P/B ratio alongside other valuation tools like the Price-to-Earnings (P/E) ratio, Return on Equity (ROE), and EV/EBITDA. For example, the P/E ratio can shed light on earnings performance, ROE highlights profitability, and EV/EBITDA offers a broader view of debt levels and enterprise value.
• Stay Updated with Reports: Regularly review quarterly and annual reports. Changes in book value – due to asset revaluations, acquisitions, or write-downs – can impact the P/B ratio, so it’s essential to stay informed.
• Consider Industry Context: A “low” or “high” P/B ratio can mean different things depending on the sector. For instance, a P/B ratio of 0.8 might indicate a bargain in banking but could signal trouble for a high-growth tech company. Comparing companies within the same industry ensures more accurate evaluations.
• Account for Market Conditions: Economic factors can distort the interpretation of P/B ratios. During downturns, asset values may drop temporarily, making some companies appear more attractive. Conversely, in bull markets, inflated asset prices might make solid companies look overvalued.
• Set Clear Investment Criteria: To avoid emotional decision-making, establish specific guidelines for interpreting P/B ratios. This could include setting ratio thresholds for different industries and combining the P/B ratio with other metrics to create a more balanced and disciplined investment approach.

These tips can help you use the P/B ratio more effectively, especially when paired with a broader analysis of market and industry trends. By adopting a systematic approach, you can make more informed and confident trading decisions.

FAQs

Why is the P/B ratio more useful for asset-heavy industries than for tech or service-based companies?

The Price-to-Book (P/B) ratio works well for industries with substantial tangible assets, like manufacturing and real estate. These businesses often derive their value from physical assets such as property, equipment, or inventory. By comparing a company’s market value to its book value, the P/B ratio helps determine whether these companies are priced fairly or not.

However, the P/B ratio isn’t as effective for tech or service-oriented industries. In these sectors, much of the value comes from intangible assets like intellectual property, software, or brand reputation. Since these aren’t fully reflected in the book value, the P/B ratio can make such companies appear undervalued. For a more accurate evaluation, other valuation methods might be better suited to capture their actual worth.

What are the risks of using the Price-to-Book (P/B) ratio alone for investment decisions?

Relying entirely on the Price-to-Book (P/B) ratio for investment decisions can lead to a skewed perspective. This metric overlooks critical elements like a company’s growth prospects, earnings performance, and intangible assets such as intellectual property. For industries like technology, which are often asset-light and focused on rapid growth, this approach may undervalue businesses significantly.

Moreover, a low P/B ratio isn’t always a green flag. It could signal deeper issues, such as financial troubles or even bankruptcy risks, rather than a hidden gem. To make well-rounded investment decisions, it’s essential to pair the P/B ratio with other valuation methods. This broader approach helps paint a clearer picture of a company’s financial standing and future potential.

How can investors in Singapore use the P/B ratio alongside other metrics to make smarter investment choices?

Singaporean investors can refine their stock analysis by combining the Price-to-Book (P/B) ratio with other essential financial metrics like the Price-to-Earnings (P/E) ratio and the debt-to-equity ratio. This blend offers a clearer view of a company’s valuation, profitability, and overall financial standing.

To make sound investment decisions, it’s crucial to factor in local market conditions and use figures in SGD for precise comparisons. For instance, using the P/B ratio alongside the P/E ratio can help pinpoint undervalued companies with strong earnings potential. At the same time, the debt-to-equity ratio ensures that these companies maintain debt at reasonable levels. By looking at these metrics together, you can make more confident and well-informed choices in Singapore’s stock market.