Think of Book Value as the net worth of a company, or its "break-up value" as it is sometimes called in financial circles.
Imagine a company listed on the PSX had to sell all its possessions (assets) and pay off all its debts (liabilities) tomorrow. The money left over is the company's Book Value.
The Simple Formula
Book Value is calculated directly from a company's balance sheet, which is one of its financial statements.
Book Value = Total Assets - Total Liabilities
Total Assets: Everything the company owns: cash, machinery, land, buildings, inventory, and money owed to it by customers.
Total Liabilities: Everything the company owes to others: bank loans, vendor payments, and other financial obligations.
Why is it called 'Book' Value?
The term "book" comes from the accounting practice of recording all assets and liabilities in a company's ledger books. The value used is the historical cost (the original price the company paid for the asset), adjusted for depreciation over time.
Book Value Per Share (BVPS)
As a stock investor at the PSX, you are more interested in the Book Value Per Share (BVPS), which tells you the book value attributable to each share you own.
Book Value Per Share (BVPS) = Total Shareholder Equity / Total Number of Outstanding Shares
The Total Shareholder Equity is essentially the same as the Book Value for common shareholders. It is the core metric used by value investors to assess the minimum tangible value of a single share.
Book Value vs. Market Value: The Key Comparison
Book Value gives you a historical snapshot, while Market Value gives you a real-time perception of the company's worth. Comparing the two is vital for making smart investment decisions at the Pakistan Stock Exchange.
Feature | Book Value (BV) | Market Value (MV) |
What it Represents | The company's net asset worth on paper (historical cost). | The total value of the company according to the stock market (real-time price). |
How it's Calculated | Total Assets minus Total Liabilities. | Current Share Price multiplied by Total Outstanding Shares (Market Capitalization). |
Source of Data | Company's Balance Sheet (Financial Statements). | PSX Trading Screen (Current Share Price). |
Stability | Relatively Stable, only changes when financial reports are released. | Highly Volatile, changes every second the PSX is open based on supply and demand. |
What it Reflects | Past performance and tangible financial base (the floor). | Future growth potential, brand value, management quality, and investor sentiment (the ceiling). |
The Price-to-Book (P/B) Ratio
The most common way PSX investors compare these two values is through the Price-to-Book (P/B) Ratio.
P/B Ratio = Current Share Price / Book Value Per Share
P/B Ratio > 1.0: The stock is trading at a premium. Investors believe the company's future growth and intangible assets (like a strong brand in Pakistan) are worth more than its assets on paper.
P/B Ratio < 1.0: The stock is trading at a discount. The market may be undervaluing the stock, or investors may have concerns about the company's future or asset quality. Value investors often look for high-quality companies trading at a P/B less than 1.0 as potential bargains.
Where to Find the Price-to-Book Value (P/B) Ratio for Pakistan Stock Exchange (PSX) Stocks?
Finding reliable and current PB (Price Book Value) ratios for PSX companies should be simple.
At StockIntel, we compile all the critical valuation data you need for your investment decisions on the Pakistan Stock Exchange. We make it easy to track the Price-to-Book ratio for any PSX stock.
How to check the Rice Book Ratio and Book Value:
For a Quick View: Use our powerful PSX Screener to instantly compare the Price Book value and other ratios including Book Value across all PSX listed companies.
For Detailed Analysis: Go to an individual PSX stock page on StockIntel. Here, you'll find a complete breakdown including the Price Book Value, as well as charts illustrating the historical PB ratio over time.