Does Shinhan Financial Group's (KRX:055550) Share Price Gain of 34% Match Its Business Performance?

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the Shinhan Financial Group Co., Ltd. (KRX:055550) share price is up 34% in the last year, that falls short of the market return. Unfortunately the longer term returns are not so good, with the stock falling 19% in the last three years.

Check out our latest analysis for Shinhan Financial Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months, Shinhan Financial Group actually shrank its EPS by 4.9%.

The mild decline in EPS may be a result of the fact that the company is more focused on other aspects of the business, right now. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

We haven't seen Shinhan Financial Group increase dividend payments yet, so the yield probably hasn't helped drive the share higher. We don't find the recent revenue growth particularly impressive at a glance, but shareholders could be projecting an uptick.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Shinhan Financial Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Shinhan Financial Group in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Shinhan Financial Group's TSR for the last year was 40%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Shinhan Financial Group shareholders gained a total return of 40% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Shinhan Financial Group (1 is significant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on KR exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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