While shareholders of Samsung Heavy Industries (KRX:010140) are in the black over 3 years, those who bought a week ago aren't so fortunate

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Samsung Heavy Industries Co., Ltd. (KRX:010140), which is up 63%, over three years, soundly beating the market decline of 12% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 28%.

In light of the stock dropping 8.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

Check out our latest analysis for Samsung Heavy Industries

Because Samsung Heavy Industries made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 3 years Samsung Heavy Industries saw its revenue grow at 11% per year. That's a very respectable growth rate. While the share price has done well, compounding at 18% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Keep in mind that the strength of the balance sheet impacts the options open to the company.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Samsung Heavy Industries is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

It's good to see that Samsung Heavy Industries has rewarded shareholders with a total shareholder return of 28% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Samsung Heavy Industries .

Of course Samsung Heavy Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.