Changes to Price-Earning ratios (from start of year to now)

Let’s see the Price-Earning ratios (PE ratio) of some select companies. I tracked the PE ratios as at 31 December 2014. I added the current PE ratios obtained from SGX StockFacts. I then compute the changes in the PE ratios between two dates for each stock. The following table shows the results.

31.12.2014 Current
Counter PE PE Change in PE
SIA 37.9 23.0 -14.9
SMRT 38.5 24.7 -13.8
M1 20.7 15.0 -5.7
CapitaLand 16.6 11.5 -5.1
SingPost 28.4 23.7 -4.7
City Developments 13.9 9.6 -4.3
OCBC 13.8 9.7 -4.1
DBS 13.7 9.9 -3.8
UOB 13.3 10.3 -3.0
StarHub 19.3 16.5 -2.8
SGX 24.8 22.6 -2.2
Keppel Corp 8.7 6.8 -1.9
SembCorp Marine 12.3 10.8 -1.5
SembCorp Industries 9.7 8.6 -1.1
Sing Tel 17.0 15.9 -1.1
Comfort Delgro 20.9 22.1 1.2
SATS 18.9 20.4 1.5
UOL 6.8 8.4 1.6
SPH 16.8 20.0 3.2

The biggest drop came from SIA (-14.9). The highest increase in PE ratio was SPH (+3.2).

One way of interpreting the changes in PE ratios is to see how investors were confident with the stock. The bigger drop in the PE ratio suggests less confidence with the stock. On the other hand for a contrarian, he may consider a significant decline in PE ratio is a potential for more upside to the share price in the future.

To further help investors with decision-making, I have included another table with share prices of the two dates (as above) and the current dividend yields. (Current dividend yields were extracted from SGX StockFacts.)

31-Dec-14 24-Nov-15 Change in Current
Counter Stock Price Stock Price Stock Price Div Yield
$ $ $ %
SIA 11.60 10.74 -0.86 2.51
SMRT 1.58 1.445 -0.14 2.25
M1 3.61 2.86 -0.75 6.61
CapitaLand 3.31 3.13 -0.18 2.88
SingPost 1.92 1.80 -0.12 3.75
City Developments 10.27 7.52 -2.75 1.06
OCBC 10.46 8.86 -1.60 4.06
DBS 20.60 16.91 -3.69 3.55
UOB 24.53 19.89 -4.64 4.27
StarHub 4.15 3.68 -0.47 5.43
SGX 7.81 7.68 -0.13 3.78
Keppel Corp 8.85 6.84 -2.01 7.02
SembCorp Marine 3.26 2.17 -1.09 5.53
SembCorp Industries 4.45 3.37 -1.08 4.75
Sing Tel 3.90 3.87 -0.03 4.52
Comfort Delgro 2.60 3.05 0.45 2.79
SATS 3.05 3.91 0.86 3.58
UOL 6.96 6.16 -0.80 2.44
SPH 4.21 3.99 -0.22 3.76

Note:
Price Earning ratio is Stock Price divided by Earnings Per Share. It indicates how investors and traders view about the value of a particular stock. The PE ratio gives an idea of how many years an investor can recover his initial investment from the company’s yearly profits. For an example, a PE of 10 times = 10 years to get back your capital. For PE to be meaningful, we make assumptions on company’s future earnings, and that is anybody’s guess. An investor who is willing to pay a stock with higher PE is expecting the company to perform at that kind of level, or he is speculating on the future price movement.

Disclaimer:
As in any investment advice, please engage buy/sell decision with caution. The author disclaimed liabilities of any sort.

Copyright © 2015, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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