Samsung’s Stock Grew Over 2x Due To This Change

Samsung‘s (SMSN) stock price gained 120% between 2015 and 2019, trading at levels of about $1,217 at the end of December 2019.
While part of the increase was due to earnings growth (Samsung’s revenues increased by about 15% and net margins improved 1.3%) and share repurchases, a bulk of the improvement in Samsung’s stock price has come from the markets assigning the company a higher P/E multiple. Below, we factorize the increase in Samsung’s stock price, breaking it down into a change in Revenue, Margins, P/E Multiple, No. of Shares, and the KRW to USD Exchange Rate.

View our complete dashboard analysis on Why Samsung Stock Is Up Over 2x Over The Last 4 Years

Samsung’s Stock Is Up 120% between Dec. 2015 and Dec. 2019, rising from $547 to $1,217

• Samsung Electronics (SMSN) has seen its stock price rise from about $547 in December 2015 to $1,217 in December 2019.
• In this analysis, we explain the change in the company’s stock price by looking at the changes in its revenues, margins, P/E multiple, and share count, between 2015 and 2019.

We break down the change in Samsung’s stock into 5 factors:

• Samsung’s Stock Price ($) = Revenue (KRW) x Margins x P/E Multiple / No. of Shares x Exchange Rate

#1. Revenues: Revenues grew from KRW 201 trillion to KRW 230 trillion between 2015 and 2019

• While Revenues grew from KRW 200.6 trillion in 2015 to KRW 243.77 trillion in 2018, driven primarily by strong memory prices, they declined to KRW 230.4 trillion in 2019 as prices for DRAM memory declined.

#2. Net Income and Margins: Samsung’s Net Margins doubled between 2015 and 2018, although they returned to 2015 levels in 2019

#3. EPS in KRW Samsung’s EPS increased from KRW 62.9k in 2015 to KRW 161k in 2018, although it declined to KRW 79k in 2019.

• Samsung’s share repurchase program has reduced its share count, providing a tailwind for its EPS.

#4. EPS in USD: Samsung’s EPS is up from about $63 per share in 2015 to about $79 per share in 2019

#5. Samsung’s Valuation: Samsung’s P/E Multiple Has Expanded Almost 2x Over The Last 4 Years

• Samsung’s P/E expanded to 18x in 2019 from about 9x in 2015, although it has been fluctuating due to the cyclical nature of the memory business, which contributes a bulk of Samsung’s profits.
• That said, cyclicality aside, the company is generally seeing higher valuations as applications such as Cloud computing and machine learning are expected to drive up memory and component demand. Moreover, the consolidation of the memory market over the last several years is also likely to be helping the company’s valuation.

Samsung’s P/E Is Higher Than Micron, But Below Apple

• Samsung’s P/E is higher than Micron, which is a pure-play memory player, with significantly cyclical earnings. However, its P/E is slightly lower than Apple’s. For more details and charts on how Samsung’s P/E compares with Apple and Micron, view our dashboard analysis Why Samsung Stock Is Up Over 2x Over The Last 4 Years

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