[Summary]
PER and PBR are effective indicators, but they alone cannot measure a company's true value. In order to avoid the "value trap" that is left unattended even with a low PBR, it is necessary to consider profitability, growth potential, and intangible assets. In this article, we will provide practical explanations on how to determine value that does not appear in numbers.
Basics and limitations of PER/PBR
Conclusion: On a standalone basis, you can only tell whether it is “cheap”
One word explanation
- PER = stock price ÷ profit (evaluation of profit)
- PBR = stock price ÷ net assets (evaluation of assets)
limit
- Difficult to reflect future growth
- Unable to distinguish between asset quality
- Distorted by temporary profits
Why does value trap occur?
Conclusion: There is a reason for the low rating
One word explanation
Value trap = stocks that seem cheap but do not rise
Main cause
- no growth potential
- low earning power
- Not attracting attention from the market
Typical example
- Companies with low PBR but low profit margins
- Companies whose industries are shrinking
Viewpoint 1: Looking at profitability (ROE)
Bottom line: How efficiently are you using your capital
One word explanation
ROE = return on equity
why is it important
- Strong relationship with PBR
- Low ROE is the cause of low evaluation
Judgment criteria
- ROE remains low → Possibility of trap
- Room for improvement → Room for re-evaluation
Viewpoint 2: Confirm the growth story
Conclusion: Ratings will not change unless there are future changes
checkpoint
- Do you have a new business?
- Is the market growing?
- Do you have a competitive advantage?
important
Can you explain “why the evaluation will change in the future”?
Viewpoint 3: Evaluate intangible assets
Conclusion: Value that cannot be expressed in numbers influences a company
One word explanation
Intangible assets = intangible competitiveness
Specific example
- brand power
- technology patent
- customer base
- network effect
Investment perspective
- Can be a source of high profits
- Create long-term competitive advantage
The combination of quantitative and qualitative is important
Conclusion: Integrating numbers and stories
framework
| classification | Content |
|---|---|
| quantitative | Key point |
| Qualitative | Business model/competitive advantage |
practical work
- First, screening (quantification)
- Next, dig deeper (qualitative)
common mistakes
- Buy only at low PBR
- ignore industry decline
- Undervalue intangible assets
Summary
- PER/PBR is just a starting point
- There is always a reason for low ratings.
- Judge based on profitability, growth, and intangible assets
action steps
- ① Analyze the reasons for low PBR stocks
- ② Check ROE and growth potential
- ③ Verbalize intangible assets