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Shinhan Financial Group Co Ltd (SHG): A Deep Dive into Its Performance Potential

South Korea
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Long-established in the Banks industry, Shinhan Financial Group Co Ltd (NYSE:SHG) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 4.13%, juxtaposed with a three-month change of 0.52%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Shinhan Financial Group Co Ltd.

Warning! GuruFocus has detected 4 Warning Signs with SHG. Click here to check it out. SHG 30-Year Financial Data The intrinsic value of SHG Shinhan Financial Group Co Ltd (SHG): A Deep Dive into Its Performance Potential

Understanding the GF Score

The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.

Financial strength rank: 2/10 Profitability rank: 6/10 Growth rank: 6/10 GF Value rank: 3/10 Momentum rank: 7/10

Based on the above method, GuruFocus assigned Shinhan Financial Group Co Ltd the GF Score of 69 out of 100, which signals poor future outperformance potential.

Shinhan Financial Group Co Ltd: A Snapshot

Shinhan Financial Group Co Ltd, with a market cap of $13.62 billion and sales of $16.28 billion, is Korea’s largest banking group. Its diverse portfolio includes Shinhan Card, the country’s largest credit card company, brokerage firm Shinhan Securities, and a top-five presence in life insurance. It also owns leasing firm Shinhan Capital, Shinhan Asset Management, and regional bank Jeju Bank, among others. Despite its impressive portfolio, the company’s operating margin stands at 0, indicating potential challenges in profitability.

Story continues Shinhan Financial Group Co Ltd (SHG): A Deep Dive into Its Performance Potential

Financial Strength Breakdown

Shinhan Financial Group Co Ltd’s financial strength indicators present some concerning insights about the company’s balance sheet health. The company’s low cash-to-debt ratio at 0.33 indicates a struggle in handling existing debt levels. The company’s debt-to-equity ratio is 2.15, which is worse than 85.38% of 1327 companies in the Banks industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company’s debt-to-Ebitda ratio is 9999, which is above Joel Tillinghast’s warning level of 4 and is worse than 0% of 30 companies in the Banks industry. Tillinghast said in his book Big Money Think’s Small: Biases, Blind Spots, and Smarter Investing that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.

Conclusion

Given the company’s financial strength, profitability, and growth metrics, the GF Score highlights the firm’s unparalleled position for potential underperformance. While Shinhan Financial Group Co Ltd has a rich history and diverse portfolio, its current financial indicators suggest that it may struggle to maintain its past performance. As value investors, it’s crucial to consider these factors when making investment decisions.

GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen

This article first appeared on GuruFocus.

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