Declining Stock and Solid Fundamentals: Is The Market Wrong About Samsung Fire & Marine Insurance Co., Ltd. (KRX:000810)?

Simply Wall St · 3d ago

It is hard to get excited after looking at Samsung Fire & Marine Insurance's (KRX:000810) recent performance, when its stock has declined 6.9% over the past month. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Samsung Fire & Marine Insurance's ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How To Calculate Return On Equity?

ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Samsung Fire & Marine Insurance is:

13% = ₩2.1t ÷ ₩16t (Based on the trailing twelve months to December 2024).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.13 in profit.

See our latest analysis for Samsung Fire & Marine Insurance

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Samsung Fire & Marine Insurance's Earnings Growth And 13% ROE

At first glance, Samsung Fire & Marine Insurance seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 9.2%. Probably as a result of this, Samsung Fire & Marine Insurance was able to see an impressive net income growth of 23% over the last five years. We reckon that there could also be other factors at play here. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then performed a comparison between Samsung Fire & Marine Insurance's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 22% in the same 5-year period.

past-earnings-growth
KOSE:A000810 Past Earnings Growth April 16th 2025

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Samsung Fire & Marine Insurance's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Samsung Fire & Marine Insurance Efficiently Re-investing Its Profits?

Samsung Fire & Marine Insurance has a three-year median payout ratio of 39% (where it is retaining 61% of its income) which is not too low or not too high. So it seems that Samsung Fire & Marine Insurance is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Additionally, Samsung Fire & Marine Insurance has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 46%. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 14%.

Conclusion

In total, we are pretty happy with Samsung Fire & Marine Insurance's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.