Three ratios are often used to determine stock valuation, namely Price Earning ratio (PE), Dividend Yield, and Price-to-Book ratio (P/B).
Back in 2013, I wrote a blog piece covering this subject matter (dated 16 October 2013).
The following table was sourced from SGX. 30 Stocks are from the Straits Times Index (STI).
|Name||P/E||P/B||Dvd Ind Yld %|
|Hongkong Land Holdings||7.6||0.5||2.9|
|Yangzijiang Shipbuilding (Holdings)||7.7||0.8||5.0|
|DBS Group Holdings||9.2||1.0||3.7|
|United Overseas Bank||9.6||1.0||3.7|
|Oversea-Chinese Banking Corporation||9.9||1.1||4.0|
|Global Logistic Properties||10.2||0.8||3.1|
|CapitaLand Mall Trust||13.0||1.2||5.0|
|Hutchison Port Holdings Trust||15.6||0.8||10.3|
|CapitaLand Comm Trust||15.9||0.9||5.7|
|Singapore Press Holdings||16.1||1.0||4.1|
|Jardine Cycle & Carriage||16.2||2.0||2.6|
|Singapore Technologies Engineering||22.6||9.1||4.0|
|Thai Beverage Public Company||23.3||5.3||2.4|
|SIA Engineering Company||24.1||2.9||3.7|
|Genting Singapore PLC||402.5||1.3||1.9|
|Source: SGX, Bloomberg & SGX StockFacts (data as of 20 July 2016)|
The table is sorted by Price Earning ratio first. Price-to Book ratio is added for additional information of the stock.
The Price Earning ratio of STI is currently at 12.43 (The Business Times, 23-24 July 2016). There are 11 stocks below 12.43. These stocks have decent dividend yields (except for City Developments). The Price-to-Book ratios are at 1.0 or below 1.0 (except for OCBC at 1.1).
With low PE ratio, there is potential for upside to share prices provided the company can sustain profits/earnings. The last part of the statement is the key in stock-picking decision-making. It is future-oriented. Can these businesses generate profits that can excite the shareholders?
Note that selecting a single stock for investment carries risk. A better approach is to invest in a basket of stocks, e.g. Exchange Traded Fund (ETF), to spread out the risk.
Disclaimer: As in any investment advice, please engage buy/sell decision with caution. The entry stock price and exit stock price are matter for careful consideration. The author disclaims any liability arising from this blog post. Use it with caution.
Copyright © 2016, 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.