International firms also face regulatory issues
In December, the South Korean government accused the Samsung chip plant of triggering breast cancer in a woman who worked at the factory. The employee had died from the cancer earlier that year, and the accusation marks the second time the South Korean government has connected cancer with the Samsung plant.
Cases involving regulators often result in lower profits for firms, but it is an inevitable component of running a multi-billion dollar business. However, Samsung hasn’t managed to keep a high return on equity when compared to Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL), and poor relations with watchdogs could impact that further.
Aside from health issues with regulators, Samsung has low investor growth expectations, as the firms PE ratio of 8.3 is well below the industry average of 28.1. But that doesn’t mean the firm is necessarily undervalued. In fact, the price to book ratio is at 1.5, which is one of the highest in the industry. The low PE is likely due to the lack of investment from North America, as the company is right up there with Apple in my books. As the only firm to really challenge Apple Inc. (NASDAQ:AAPL) in the smartphone industry, Samsung has what it takes to continue its growth long into the future.
For example, the new Galaxy S4 Active could further challenge Apple, and could be a massive summer hit. The device is scratch-proof, shock-proof and waterproof. That’s the type of innovation that shareholders should expect from a strong tech company, as they look for substantial gains in this stock’s price.
Tech firms have balancing act
Tech companies face a slew of regulatory challenges as they attempt to balance their revenue-generating businesses with government policy. With Apple Inc. (NASDAQ:AAPL)’s Cook quickly diffusing an investigation into his firm’s tax practices, he was able to accomplish that balancing act. Google and Samsung will need to do the same if those businesses hope to maximize their revenue-generating potential, because increased regulation could affect the bottom-line at these firms.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG).
The article Tech Firms Need to Watch out for Watchdogs originally appeared on Fool.com.
Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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