P/E, P/BV and Dividend Yield: Valuing CSE Stocks

A share price on its own tells you nothing about whether a stock is cheap or expensive. LKR 46 can be a bargain and LKR 204 can be expensive, or the other way round. Valuation ratios fix that by comparing the price with something the business actually produces or owns.

This article covers the three ratios Sri Lankan investors use most, with worked examples from two very different CSE companies: Dialog Axiata (DIAL) and Commercial Bank of Ceylon (COMB).

All prices are closing prices on 25 September 2026. Financial figures come from each company’s quarterly interim reports filed with the CSE, up to the quarter ended 30 June 2026.

P/E: price to earnings

P/E = share price ÷ earnings per share (EPS)

The P/E ratio tells you how many rupees you’re paying for each rupee of annual profit. A P/E of 10 means that, if profits stayed flat, the company would take 10 years to earn its share price.

CSE companies report quarterly, so the usual approach is trailing twelve months (TTM): add up the EPS from the last four quarters.

Dialog Axiata, basic EPS by quarter:

P/E = 46.40 ÷ 3.36 = 13.8

Commercial Bank: the last four quarters’ EPS were 10.18, 7.82, 10.73 and 10.41, a TTM EPS of 39.14.

P/E = 204.00 ÷ 39.14 = 5.2

Reading P/E

• Compare within a sector, not across the market. Banks on the CSE have long traded on lower P/Es than telecoms or consumer companies. A P/E of 5 for a bank and 14 for a telco can both be “normal.”
• Look at the trend in earnings. Dialog’s quarterly EPS almost doubled over the year. If that growth holds, today’s P/E on last year’s earnings overstates what you’re paying for next year’s.
• One-off items distort it. A large gain or impairment in a single quarter can make P/E look unusually low or high. Commercial Bank’s December 2024 quarter, for example, had very large one-off movements in impairment and asset derecognition. That’s why you should check the income statement rather than rely on one number.
• Negative earnings mean P/E is meaningless. A loss-making company has no P/E.

P/BV: price to book value

P/BV = share price ÷ net assets (book value) per share

Book value is what’s left for shareholders after subtracting all liabilities from all assets, as recorded on the balance sheet. Most CSE companies print net assets per share directly in their quarterly balance sheet.

• Dialog: net assets per share at 30 June 2026 = LKR 9.68. P/BV = 46.40 ÷ 9.68 = 4.8
• Commercial Bank: net assets per share at 31 March 2026 (its latest published figure) = LKR 203.34. P/BV = 204.00 ÷ 203.34 = 1.0

Why is one 4.8 and the other 1.0?

P/BV is closely tied to return on equity (ROE): how much profit a company makes on its shareholders’ capital. Roughly:

P/BV ≈ ROE × P/E

• Dialog earned about LKR 30.9 billion for shareholders over the last four quarters on average equity of roughly LKR 88 billion, an ROE of about 35%. 0.35 × 13.8 ≈ 4.8, matching its actual P/BV.
• Commercial Bank earned about LKR 65 billion on roughly LKR 336 billion of equity, an ROE of about 19%. 0.19 × 5.2 ≈ 1.0.

So a high P/BV isn’t automatically “expensive.” It can reflect a business that earns high returns on a small asset base. P/BV matters most for banks, finance companies and insurers, where the balance sheet mostly holds financial assets carried near their real value. For those companies, P/BV is often the first ratio analysts look at.

Dividend yield

Dividend yield = dividends per share over the last 12 months ÷ share price

Dividend yield is the cash return you’d get from dividends alone at today’s price.

Dialog’s June 2026 quarterly report shows a dividend of LKR 2.20 per share in that quarter, and no other dividend in the previous twelve months.

Yield = 2.20 ÷ 46.40 = 4.7%

Reading dividend yield

• Check whether it’s sustainable. Dialog’s TTM EPS of 3.36 covers the 2.20 dividend about 1.5 times. When the payout is larger than earnings, the dividend is being funded from past profits or borrowing and may not last.
• Watch the XD date. On the CSE a share goes ex-dividend (XD): from that date, a buyer no longer gets the declared dividend, and the price usually drops by roughly the dividend amount. Look for XD dates in the company’s corporate announcements.
• High yield can be a warning. A very high yield often means the price has fallen because the market expects the dividend to be cut.
• Tax. Dividends in Sri Lanka are subject to withholding tax, so your net yield is lower than the headline figure.

Putting the three together

Neither set of numbers says “buy” or “sell.” What they give you is a starting point for better questions. Why does the market pay 14 times earnings for one and 5 for the other? Are Dialog’s returns durable? Is the bank’s loan book as sound as its book value assumes? Answering those means reading the full statements and the company’s announcements.

Find these numbers on CeylonCharts

Open any stock’s chart, then open the Financials view. It shows the quarterly income statement, balance sheet and cash flow line by line, including EPS and net assets per share. To shortlist stocks on price trend first, see how to screen CSE stocks.