Is Samsung Electro-Mechanics' (KRX:009150) Share Price Gain Of 263% Well Earned?

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Samsung Electro-Mechanics Co., Ltd. (KRX:009150) stock is up an impressive 263% over the last five years. It's also good to see the share price up 30% over the last quarter. But this could be related to the strong market, which is up 18% in the last three months.

Check out our latest analysis for Samsung Electro-Mechanics

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Samsung Electro-Mechanics actually saw its EPS drop 9.7% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.6% dividend yield is unlikely to be propping up the share price. On the other hand, Samsung Electro-Mechanics' revenue is growing nicely, at a compound rate of 7.6% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Samsung Electro-Mechanics 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.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Samsung Electro-Mechanics the TSR over the last 5 years was 280%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Samsung Electro-Mechanics shareholders gained a total return of 43% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 31% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before forming an opinion on Samsung Electro-Mechanics you might want to consider these 3 valuation metrics.

But note: Samsung Electro-Mechanics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

If you’re looking to trade Samsung Electro-Mechanics, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.