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