Samsung Life Insurance Co., Ltd.'s (KRX:032830) Price Is Right But Growth Is Lacking

Samsung Life Insurance Co., Ltd.'s (KRX:032830) price-to-earnings (or "P/E") ratio of 8.1x might make it look like a buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 13x and even P/E's above 27x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Samsung Life Insurance as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

View our latest analysis for Samsung Life Insurance

Want the full picture on analyst estimates for the company? Then our free report on Samsung Life Insurance will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The Low P/E?

Samsung Life Insurance's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 50% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 7.9% each year over the next three years. That's shaping up to be materially lower than the 18% each year growth forecast for the broader market.

In light of this, it's understandable that Samsung Life Insurance's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Samsung Life Insurance's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Samsung Life Insurance's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Samsung Life Insurance has 2 warning signs we think you should be aware of.

You might be able to find a better investment than Samsung Life Insurance. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.