The price-to-book ratio (PBR), a key investment indicator for Samsung Electronics, has dropped to around 0.9. This is the first time this has happened since the 1998 financial crisis. It indicates an unusual decline in Samsung Electronics’ stock price. As the situation is outside of typical expectations, there are concerns about increasing market turmoil.
According to an analysis by Hankyoreh on November 14, of Samsung Electronics’ financial statements and market capitalization trends since 1998, the PBR was recorded at 0.896 based on the closing price of that day. In the past month, as the stock price fell to the mid-50,000 won range, the PBR dropped below 1, and with the stock price hitting 40,000 won, the PBR fell even further below 0.9. This is the lowest level since the end of 1998 when the domestic stock market started recovering after a sharp decline due to the financial crisis.
The PBR is a crucial indicator that measures the stock price relative to the net assets (equity) of a company, showing whether the stock is undervalued or overvalued. A ratio below 1 suggests that the current stock price is lower than what could be obtained by liquidating the company’s assets at book value, indicating a poor investor evaluation of the company. Hankyoreh calculated the PBR by dividing the sum of the market value of common and preferred shares by the net assets (controlling interest) at the end of the latest quarter.
Samsung Electronics’ PBR is significantly lower than that of its competitors. SK Hynix hovers around 2, and Micron Technology, which ranks third in memory semiconductor market share after Samsung and Hynix, also exceeds 2. Among peers that are considered representatives of their countries like Samsung, the disparity is even greater, with Taiwan’s TSMC at over 7 and Apple’s PBR nearing 60. Even considering Samsung Electronics’ tendency to accumulate more relative capital (net assets), its PBR is notably low.
The unprecedented decline has also caused confusion in the market. The stock fell to the 40,000 won level just a month after hitting 50,000 won, making it difficult for analysts to provide specific interpretations or forecasts. Kim Young-geon of Mirae Asset Securities drastically lowered their target price for Samsung Electronics by over 20%, yet still stated that the recent decline is excessive even when compared to the company’s past growth and profitability. Park Yu-ak of Kiwoom Securities adjusted his target price to 75,000 won, noting that restoring trust among market participants will be necessary to boost the stock price.