Delving into the connection between brand and share price with Interbrand report

Delhi: New research released by Interbrand, in partnership with NewtonX and  Brodeur Partners, unveiled a connection between brand and share price. The report, ‘How Brand  Impacts Share Price’ explores the  valuation of S&P 500 companies, investor community perceptions of brand, and how to obtain a more  accurate share price valuation. 

Greg Silverman, Global Director of Brand Economics at Interbrand, said, “This study is a game changer in redefining the role and value of brand, elevating it from traditional  marketing to an important lever used by CEOs and CFOs to help increase share price. Given our research  identified many companies as underperforming, there is a strategic opportunity for companies to reevaluate their approach to brand strategy and investor communications, and gain a critical advantage  in their valuation.”

The survey explored investor community perceptions and opinions of brands in calculating P/E ratios and  share price. Surveys of the investment relations community, financial analysts and journalists showed  they are aware of the significant impact brand has on valuation, with 76% stating that brand strategy has moderate or large impact on changes to P/E ratio. Further, brand strategy ranks as the second most  important consideration (19.8%) for investment analysts and journalists when evaluating a company’s prospects (second to financial forecasting at 29.1%). Brand was found to be more impactful than competitive threats (18.6%), macroeconomic factors (17.9%), and senior management reputation (14.7%). 

While the investment community currently lacks the deep understanding of brand strategy that is  needed to create an accurate valuation, they are seeking to learn more. 90% of investment analysts say they do not have  a deep understanding of the positioning and strategy of the companies in their portfolio. This  knowledge gap underscores a critical need for enhanced brand communications between  corporations and the analyst community. 

While 39% of analysts and  journalists said they often or almost always receive a briefing from the company they’re evaluating, 64%  said they would like to be briefed at that frequency. 

The data analysis covered 51 market sectors, providing valuable insights into brand valuation by vertical  markets, including technology, medical device and finance sectors, indicative of wider trends among  industries. Findings show that 67% of companies in the dataset are not consistent overperformers – hence implying that their stock is undervalued, or the share price is more volatile than its underlying  performance.  

Andrew Miller, Chief Growth Officer,  Interbrand, said, "In the dynamic landscape of corporate valuation, this report illuminates a powerful truth: the  understood value of a brand is a vital contributor to a company’s share price. With these revelations, C Suite executives are empowered to strengthen their corporate narratives with the goal of more  effectively communicating with the investment community.”