How to read PER and PBR

PER

PER compares market value with earnings. A lower PER can suggest cheaper valuation, but it can also reflect declining profits, cyclical peak earnings, litigation risk, or weaker future expectations. Loss-making companies usually do not have a meaningful PER.

PBR

PBR compares market value with shareholder equity. It is often more useful for banks, insurers, and asset-heavy businesses than for software or brand-heavy companies. A low PBR does not automatically mean liquidation value is available to shareholders.

Practical checks

• Compare companies in similar sectors and accounting environments.
• Check whether earnings include one-time gains or losses.
• Review debt, cash flow, margins, and return on equity.
• Use several years of data instead of a single quarter.