For investors aiming to outperform the market through stock selection, the reality is often challenging. Picking individual stocks carries the inherent risk of underperformance compared to broader market indices. This has been evident for long-term shareholders of Samsung Electronics Co., Ltd. (KRX:005930), as the stock price has declined by 31% over the past three years. This is a significant shortfall when compared to the market’s decline of approximately 14% during the same period. The last year has also been disappointing, with a 29% drop in share price, leaving many investors concerned. More recently, in the past 90 days, the stock has fallen by 10%, although this period coincides with a general market downturn of 5.6%.
To understand these longer-term shareholder losses, it’s crucial to examine Samsung Electronics’ underlying fundamentals and assess their consistency with the stock’s returns.
Check out our latest analysis for Samsung Electronics
As Warren Buffett famously noted, market prices and intrinsic value can diverge significantly. Analyzing the relationship between a company’s stock price and its earnings per share (EPS) can provide insights into shifts in market sentiment over time.
Over the past three years, Samsung Electronics experienced a compound annual EPS decline of 6.2%. Interestingly, this EPS reduction is less severe than the 11% annual decrease in the stock price. This discrepancy suggests that market expectations for Samsung Electronics might have been overly optimistic in the past, leading to a correction in stock valuation.
The chart below illustrates the trend of Samsung Electronics’ EPS over time. (Click on the chart for precise figures).
Samsung Electronics KRX:005930 Earnings Per Share Growth Comparison
KOSE:A005930 Earnings Per Share Growth January 4th 2025. For a deeper dive into Samsung Electronics’ financial health, explore this interactive graph detailing Samsung Electronics’ earnings, revenue, and cash flow.
Dividend Impact on Total Shareholder Return
When evaluating stock performance, it’s essential to consider the total shareholder return (TSR) in addition to just the share price return. TSR calculates the overall return, incorporating the value of reinvested cash dividends and the economic impact of any discounted capital raisings or spin-offs. For dividend-paying companies like Samsung Electronics, TSR often presents a more complete picture of investor returns.
In the case of Samsung Electronics, the 3-year TSR is -26%. This figure is higher than the -31% share price return mentioned earlier. This difference is attributed to the dividends distributed by Samsung Electronics, which have partially offset the decline in share price, thereby improving the total return for shareholders.
Long-Term Perspective and Potential Opportunities
While the broader market experienced a loss of approximately 6.9% over the last twelve months, Samsung Electronics shareholders faced a steeper decline of 27% (including dividends). It’s important to acknowledge that market downturns can lead to the overselling of even fundamentally sound stocks. Therefore, focusing on underlying business developments remains crucial.
Looking at a longer five-year horizon, Samsung Electronics shareholders have seen a positive annualized gain of 0.8%. If fundamental indicators continue to point towards sustainable long-term growth for Samsung, the current stock sell-off could potentially represent a valuable investment opportunity. To assess whether Samsung Electronics is currently undervalued compared to its peers, examining these 3 valuation measures can provide further insight.
For investors interested in exploring companies with potentially stronger financial growth, this free list of companies demonstrating proven earnings growth offers alternative investment ideas.
Please note that market returns referenced in this analysis reflect the market-weighted average returns of stocks currently traded on South Korean exchanges.
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This article, provided by Simply Wall St, is intended for general informational purposes only. Our analysis is based on historical data and analyst forecasts, utilizing an objective methodology, and should not be considered financial advice. It is not a recommendation to buy or sell any stock and does not account for individual investment objectives or financial circumstances. Our aim is to deliver long-term, fundamental data-driven analysis. Please be aware that our analysis may not always incorporate the most recent price-sensitive company announcements or qualitative information. Simply Wall St holds no positions in the stocks mentioned.
