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Samsung C&T Corporation's (KRX:028260) Shares Climb 30% But Its Business Is Yet to Catch Up

Simply Wall St · 05/26 22:22

Samsung C&T Corporation (KRX:028260) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 7.8% isn't as attractive.

Even after such a large jump in price, it's still not a stretch to say that Samsung C&T's price-to-earnings (or "P/E") ratio of 11.2x right now seems quite "middle-of-the-road" compared to the market in Korea, where the median P/E ratio is around 12x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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While the market has experienced earnings growth lately, Samsung C&T's earnings have gone into reverse gear, which is not great. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Check out our latest analysis for Samsung C&T

pe-multiple-vs-industry
KOSE:A028260 Price to Earnings Ratio vs Industry May 26th 2025
Keen to find out how analysts think Samsung C&T's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Growth For Samsung C&T?

In order to justify its P/E ratio, Samsung C&T would need to produce growth that's similar to 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 2.4%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 68% 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 5.5% per annum over the next three years. That's shaping up to be materially lower than the 16% per annum growth forecast for the broader market.

With this information, we find it interesting that Samsung C&T is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Final Word

Samsung C&T's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Samsung C&T's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

It is also worth noting that we have found 1 warning sign for Samsung C&T that you need to take into consideration.

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