Samsung Electronics' (KRX:005930) investors will be pleased with their notable 98% return over the last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Samsung Electronics share price has climbed 74% in five years, easily topping the market return of 29% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 11%, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Samsung Electronics

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Samsung Electronics actually saw its EPS drop 12% 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 1.9% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 4.8% per year is probably viewed as evidence that Samsung Electronics is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Samsung Electronics is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Samsung Electronics' TSR for the last 5 years was 98%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Samsung Electronics shareholders have received a total shareholder return of 11% over one year. And that does include the dividend. However, that falls short of the 15% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Samsung Electronics better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Samsung Electronics you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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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.