For investors aiming to outperform the market through stock selection, Samsung Electronics Co., Ltd. (KRX:005930) presents an interesting case study. However, a look at recent performance reveals that shareholders in KRX:005930 have experienced returns below the broader market average over a significant period. This analysis delves into the stock’s performance, comparing it against market trends and examining the underlying factors influencing its valuation.
Over the past three years, Samsung Electronics‘ stock price has declined by 31%. When we compare this to the market’s decline of approximately 14% during the same period, it becomes clear that KRX:005930 has underperformed. The situation worsened over the last year, with the share price falling by 29%. More recently, in the last 90 days, shareholders have seen a further 10% decrease, although this period coincides with a general market downturn of 5.6%. This sustained underperformance prompts a deeper investigation into the fundamentals of Samsung Electronics (KRX: 005930).
To understand the discrepancy between stock performance and potential value, it’s crucial to analyze the company’s underlying financial health. By examining key metrics, we can gain insights into whether the market’s negative sentiment towards KRX 005930 is justified or if it presents a potential investment opportunity when we compare its price to its intrinsic value.
Check out our latest analysis for Samsung Electronics
Drawing on the wisdom of Warren Buffett, who highlighted the frequent disconnect between market price and intrinsic value, we can start by looking at Earnings Per Share (EPS). EPS is a key indicator of a company’s profitability and a significant driver of long-term stock value.
Earnings Per Share (EPS) Analysis for KRX 005930
Over the past three years, Samsung Electronics experienced an EPS decline at an average rate of 6.2% per year. While a decline in EPS is generally concerning, it’s noteworthy that the share price decreased at a faster rate of 11% annually. This divergence suggests that market sentiment towards KRX 005930 may have become overly pessimistic compared to the actual rate of earnings decline. In essence, the market’s negative reaction, when we compare it to the EPS trend, indicates a potential overcorrection.
You can observe the EPS trend for KRX:005930 in the chart below, illustrating the changes over time.
earnings-per-share-growth
KRX 005930 Earnings Per Share Growth Chart – Data as of January 4th 2025. Analyze Samsung Electronics’ earnings trajectory in detail through interactive graphs.
Further explore Samsung Electronics’ financial health with an interactive visualization of earnings, revenue and cash flow.
The Impact of Dividends on Total Shareholder Return
When evaluating stock performance, it’s essential to consider not only share price changes but also the impact of dividends. The Total Shareholder Return (TSR) provides a more complete picture by including the value of dividends, assuming reinvestment. For companies like Samsung Electronics (KRX: 005930) that distribute dividends, TSR can significantly differ from the share price return alone.
In the case of Samsung Electronics, the 3-year TSR is -26%. When we compare this to the previously mentioned share price return of -31%, we see that dividends have indeed lessened the overall loss for investors. The dividends paid by KRX 005930 have provided a positive contribution to the total return, highlighting the importance of considering TSR when assessing long-term investment performance.
A Balanced View and Potential Opportunities
While the past year has been challenging for Samsung Electronics shareholders, with a 27% loss even after including dividends (compared to a broader market loss of 6.9%), it’s important to maintain a balanced perspective. Market downturns can sometimes lead to stocks being oversold, creating potential buying opportunities for long-term investors.
Looking at a longer five-year horizon, Samsung Electronics (KRX: 005930) has delivered an average annual gain of 0.8%. This suggests that despite recent difficulties, the company has demonstrated long-term growth potential. If fundamental indicators remain positive and point towards sustainable long-term growth, the current stock sell-off could indeed represent a valuable opportunity. Investors might find it beneficial to compare KRX 005930‘s current valuation to its intrinsic value and that of its peers to ascertain if it is undervalued. These 3 valuation measures can assist in making an informed decision.
For investors seeking companies with strong earnings growth potential, this free list of companies that have proven they can grow earnings offers further research avenues.
Note: Market returns referenced are based on the market-weighted average returns of stocks currently traded on South Korean exchanges.
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Disclaimer: This article, provided by Simply Wall St, is intended for general informational purposes only. It is based on historical data and analyst forecasts, utilizing an unbiased methodology, and should not be considered financial advice. It does not constitute a recommendation to buy or sell any stock and does not account for individual investment objectives or financial situations. Our analysis focuses on long-term, fundamental data. It may not always reflect the most recent price-sensitive company announcements or qualitative factors. Simply Wall St holds no positions in the stocks mentioned.
