What is PER?
Conclusion: An indicator that shows whether stock prices are overvalued relative to profits
One word explanation
PER=Stock price ÷ Earnings per share (EPS)
meaning
It shows how many years' worth the current profit level is.
example
- PER 10x → Recovered with 10 years' worth of profits
- PER 30x → High growth expectations
points
- Low → Possibility of being cheap
- High → Expected growth or expensive
What is PBR?
Conclusion: An indicator that shows whether stock prices are undervalued relative to assets
One word explanation
PBR=Stock price ÷ Net assets per share (BPS)
meaning
Indicates "how the stock price compares to the company's dissolution value."
example
- PBR1x → Same as theoretical dissolution value
- PBR0.5x → Can be purchased with half of the assets
points
- 1x or less → easy to be seen as cheap
- However, it may be left alone
Difference between PER and PBR
Conclusion: What you see is different
| indicators | What to see | Companies suitable for |
|---|---|---|
| PER | profit | growing company |
| PBR | assets | Stable companies/asset stocks |
Basics of proper usage
Conclusion: Use depending on company type
PER is valid
- IT/growth companies
- Companies with growing profits
PBR enabled
- Banking/Real estate
- Companies where asset value is important
Points to note (important)
Conclusion: cannot be determined by itself
Pitfalls of PER
- Temporary profits seem low
- Cannot be used for loss-making companies
Pitfalls of PBR
- I don't know the quality of the assets
- Does not increase even with low PBR (value trap)
How to use it in practice
Conclusion: Combine and judge
step
- Search for cheap candidates using PER/PBR
- Check ROE (profitability)
- Analyze growth potential and business model
common misconceptions
- Low PER = definitely a good deal → ❌
- PBR 1x or less = safe → ❌
correct understanding
- There's a reason why it's cheap
- Indicators are just an “entrance”
Summary
- PER = profit-based evaluation
- PBR = Asset-based valuation
- Important to use in combination
action steps
- ① Search for candidates by PER/PBR
- ② Check ROE and growth potential
- ③ Final judgment based on qualitative analysis