Recently, Li Siyuan, founder and CEO of Yunmu Longwind as well as a senior marketing expert, was invited to participate in an industry interview, where he provided in-depth interpretations focusing on the latest research report released by Interbrand, a world-renowned brand consulting firm. The report points out that 67% of companies in the S&P 500 Index may have valuation deviations, a figure that has sparked renewed attention to "brand asset value" in the market. Drawing on his over a decade of practical experience deeply engaged in the brand strategy field, Li Siyuan conducted a thorough analysis of the core causes behind these valuation deviations and offered practical approaches for enterprises to bridge the gap between brand perception and stock prices.
Li Siyuan (Left) / Host (Right)
Root Cause of Valuation Deviations: Market Misinterprets "Brand" as a Core Asset
"A brand is never an abstract concept of 'word-of-mouth'; instead, it is a tangible asset composed of financial performance, the driving effect on consumer choices, and brand strength. However, most market participants precisely overlook this fact," Li Siyuan pointed out the core crux of valuation deviations at the very beginning of the interview.
He explained that among the three elements defining brand value as proposed by Interbrand, financial performance serves as the foundation for a company's profitability; the driving effect of a brand on consumer choices determines its market competitiveness; and brand strength is related to an enterprise's ability to continuously attract demand and reduce operational risks. In reality, however, investors often focus on explicit indicators such as product sales and short-term profits, turning a blind eye to the brand's role in supporting long-term profitability.
Li Siyuan took the technology industry as an example: "In the early days, Oracle overly focused on product R&D and rarely conveyed its brand advantages to the market. Investors only paid attention to its software sales volume while ignoring the customer stickiness brought by the brand. This directly led to Oracle's valuation remaining lower than that of its peers for a long time. It was not until later, when Oracle adjusted its strategy and proactively explained its brand value in earnings conferences and industry forums, that its stock price gradually returned to a reasonable level."
Prominent Cognitive Contradiction: 76% of Analysts Recognize Brand Importance, Only 10% Truly Understand It
A set of data in the report has triggered extensive discussions: 76% of investment analysts and financial journalists believe that brands have a significant impact on a company's price-to-earnings ratio (P/E ratio), yet only 10% of respondents stated that they truly understand brand positioning and strategy. Regarding this, Li Siyuan opined that this gap between "knowing the importance but not knowing how to evaluate" is the key factor exacerbating valuation deviations.
"Take Henry Schein in the medical device industry as an example. After the pandemic, its revenue recovered rapidly, but analysts failed to recognize that the recovery of its brand was even faster, resulting in the undervaluation of the company. Another case is AlignTechnology, which has high brand awareness among young consumers. However, because the market failed to fully grasp this advantage, divisions emerged in expectations for its profitability," Li Siyuan further analyzed. This cognitive dislocation not only "buries" the achievements of enterprises' brand building but also may lead investors to make wrong decisions—harming their own interests while causing high-quality enterprises to miss out on reasonable valuations.
As the helmsman of Yunmu Longwind, he added that this phenomenon is also frequently observed in the process of serving enterprises: "Many enterprises invest a great deal of resources in brand building but fail to 'translate' the brand value to the investment community. In the end, they fall into the dilemma of 'doing without speaking, making the value in vain'."
Significant Industry Differences: Technology Prone to Undervaluation, Medical Industry Lacking Voice, Finance More Stable
Regarding the report's mention of differences in the correlation between brands and stock prices across the three major industries—technology, medical, and finance—Li Siyuan provided targeted interpretations based on the characteristics of each industry.
"The technology industry is a typical example of 'high value yet prone to undervaluation'," he said, taking Apple as an instance. "The market always focuses on the sales volume of individual models such as the iPhone and iPad, while ignoring its ecosystem that covers everything from mobile phones and computers to services. The sustained profitability brought by this ecosystem is the core value of the brand, but it is often overlooked, leading to long-term room for releasing Apple's valuation potential."
The problem in the medical device industry lies in "too weak a brand voice". Li Siyuan pointed out that most medical device enterprises only discuss performance and technology in earnings conference calls and never mention brand strategy: "Henry Schein is a typical case. The signals of its brand recovery were not conveyed, so the market naturally could not provide a reasonable valuation for it."
In contrast, the valuation in the financial industry is more stable. "Berkshire Hathaway, through Warren Buffett's annual letters, and American Express, through multi-channel communication, continuously convey their brand strategies to the market. Investors have a clear understanding of their brands, so the fluctuations in their valuations are naturally smaller," Li Siyuan emphasized. This proves that "the quality of brand communication directly determines the stability of valuation".
Four-Step Solution: Transforming Brands from "Invisible" to "Explainable"
When asked about how to bridge the gap between brand perception and stock prices, Li Siyuan integrated Yunmu Longwind's practical experience with the "four-step strategy" in Interbrand's report and put forward implementable suggestions.
Step 1: Establish a brand valuation model
"We need to quantify indicators such as brand strength and financial performance, and provide investors with a clear 'brand value account book', rather than vaguely saying 'our brand is good'," Li Siyuan explained.
Step 2: Identify cognitive deviations in the investment community
"First, we need to figure out which advantages of the brand investors have misunderstood—whether they fail to see the ecological value or overlook the customer stickiness. Only by identifying the deviation points can we conduct precise communication," he said.
Step 3: Optimize communication channels
"Earnings reports, industry forums, and investor meetings are all key scenarios. For example, if Oracle had clarified its transformation strategy in these channels earlier in its history, its stock price might have risen long ago," Li Siyuan noted.
Step 4: Adjust brand strategy and convey it continuously
"If Apple talked more about its ecological value instead of focusing only on individual products, its valuation might be more reasonable. Enterprises need to clarify their brand positioning and then convey it repeatedly to help the investment community reach a consensus," he added.
"The core is to transform a brand from an 'invisible asset' into an 'explainable value'," Li Siyuan emphasized. This is also the core logic of Yunmu Longwind when providing brand consulting services to enterprises—"A brand should not only be built for consumers to see but also translated for investors to understand."
Future Competition: Brand Cognition Becomes Enterprises' "Moat"
At the end of the interview, Li Siyuan made a forecast on industry trends: In the future, competition among enterprises will evolve from single-dimensional competition of products and technologies to comprehensive competition centered on "whether brand value can be correctly recognized".
"A brand is never intangible; it is clearly reflected in a company's valuation, hidden in the stock price curve, and more importantly, serves as an 'asset manual' in the eyes of investors," said Li Siyuan, an expert deeply engaged in the marketing field. He expressed the hope that more enterprises will recognize the deep correlation between brands and valuations, and through scientific strategies, truly transform brand value into stock price support.
"For enterprises, valuing brands and mastering the art of conveying brand value will become the core moat for navigating market cycles and achieving long-term growth in the future," Li Siyuan concluded.
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