Interbrand Insights: The Unseen Impact of Brand Value on Share Price

While my posts often focus on the more personal aspects of my life, I want to start showing some insights from my professional career/ topics I find interesting. I have been doing quite a lot in the last year and I want to see what you think about it!

As you may be aware, I've been working at Interbrand for almost a year, and just last week, we rolled out a report that casts a spotlight on a critical, yet frequently overlooked, facet of the stock market: the profound influence of brand value on share price.

I’m not sure why, but I’ve alway been extremely interested in quantifying the more abstract parts of businesses. I truly think there is a lot more to a company than its balance sheet. I've heard a lot of investors talk about their “gut” playing a strong role when deciding where to invest. But what happens when some of us don’t have that natural instinct, what can we rely on to make those decisions? We need to find ways of transforming those abstract feelings into concrete data, and this is where companies like Interbrand come in. 

This report was carried out by the Brand Economic team at Interbrand, led by Greg Silverman, and it gives us an insight of the importance for companies to allow their investors  to replace their gut feeling with tangible data, inspiring confidence and enabling them to make more informed and data based decisions.

Interbrand’s research revealed that a staggering 67% of S&P 500 companies might not be accurately valued, mainly because the considerable influence of their brand isn't fully accounted for in their stock price. This discovery indicates that a significant piece of businesses could be undervalued, or their share price more volatile, owing to the market's underestimation of their brand's potency.

This exploration started with a straightforward observation: the relationship between a company’s brand growth, its earning potential, and its public share price is more complex than it appears. Digging deeper, they noticed that price-to-earnings (P/E) ratios, frequently fail to reflect its brand performance accurately. This discrepancy points to a gap in the market's understanding and acknowledgment of a brand's real contribution to a company's value.

Imagine you possess a powerful asset, yet its potential is unrecognized by those who dictate your market value. That's what numerous companies face today, highlighting the urgent need for more transparent communication about the strength of a brand and its crucial role in propelling business success.

The report from Interbrand doesn't merely spotlight the issue; it charts a course for improvement. Through the analysis of over 500 companies and primary research with the investment community, they’ve identified strategies for improved brand communication that could narrow the understanding gap, potentially leading to more precise company valuations.

I usually don’t post much about my work at Interbrand, but I found this report extremely interesting. If you're interested in more blog posts about topics related to my work at  Interbrand/ my professional development, let me know!

For those intrigued by the dynamics of brand value and its implications on the market, the full report is packed with detailed data and analysis, providing a comprehensive roadmap for companies aiming to harness their brand for enhanced financial recognition.

Check it out in detail here: https://interbrand.com/thinking/how-brand-impacts-share-price-report-download/

Best,

Fer.