Daepak
Body (markdown)
PER, Price Divided by Earnings
PER (price-to-earnings ratio) is an indicator that divides the stock price by earnings per share (EPS). Dividing market capitalization by net income gives the same number. A PER of 10x means it would take 10 years of current earnings to equal the stock price. The KOSPI (Korea Composite Stock Price Index) average PER is generally known to be around 10–12x. However, a low PER does not automatically mean undervaluation. Stocks whose earnings temporarily surged at a cyclical peak can have a misleadingly low PER.
PBR, Price Divided by Assets
PBR (price-to-book ratio) is the stock price divided by book value per share (BPS). A ratio below 1x means the market values the company below its net assets, but a low PBR can be justified if many of those assets have low profitability. Sectors like manufacturing, which have large asset bases and low profit margins, tend to trade at low PBRs.
Why You Should Compare Against Sector Averages
The same PER can have different appropriate levels across sectors. Sectors with high growth expectations, such as semiconductors and biotech, tend to have high PERs, while sectors with limited growth, such as banks and steel, tend to have low PERs. Therefore, individual stocks should be compared with the average PER and PBR of their sector. For example, semiconductor stocks such as Samsung Electronics or SK hynix can command PERs above the market average. If a stock's metrics are much lower than its sector average, you need to determine whether it is due to deteriorating earnings or simply undervaluation.
Why PER and PBR Alone Are Not Enough
PER and PBR show whether a stock is cheap, but whether it is good should be checked together with ROE (return on equity). A company with high ROE may deserve a re-rating even at the same PBR. During rate-hiking periods, the present value of future earnings falls, which can pressure growth stock PERs. The recent KOSPI correction was also not unrelated to the Bank of Korea base rate hike and foreign net selling.
On the Daepak dashboard (/app), you can check individual stocks' PER and PBR alongside sector comparison metrics.
This article is for informational purposes only and does not recommend buying or selling any specific stock.