Book value

Two out of five Korean stocks underperform book value with P/B below 1.0

[Source: Korea Exchange]

While major indexes have lost nearly 20% this year, as many as 40% of Korean listed companies have underperformed their book value.

On Monday, a total of 853 companies listed on the main Kospi and the secondary Kosdaq had price-to-book ratios below 1.0x as of June 17, up 35% from December.

The P/B ratio is an indicator of whether a stock is overvalued or undervalued, with a figure below 1.0x meaning that a company’s current market value is lower than its book value, or undervalued, and vice versa above 1.0x.

Undervalued stocks halved last year from 1,300 in May 2020, when massive overseas selling following the virus outbreak devastated the Korean market. But the number jumped alongside the fall in Korean stocks.

Even large-cap stocks are now poorly valued.

LG Chem’s P/E ratio fell to 0.97x as of June 17 from 1.6x at the end of last year, CJ CheilJedang to 0.95x from 1.2x, Kumho Petrochemical to 0.83x from 1, 77x and Meritz Financial Group at 0.93x versus 1.76x.

The bottom is yet to come, however.

The P/R ratio of Kospi-listed companies averaged 0.96x last Friday. The average ACB was 0.88x in October 2018 when the US-China trade dispute spilled over into the financial market, and 0.81x in October 2008 with the collapse of Wall Street. In March 2020, the figure was 0.64x amid the virus pandemic.

By Kang Min-woo and Lee Ha-yeon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]