Would Peter Lynch Buy COSCO Corporation (Singapore)?

Investing guru, Peter Lynch, once said that we have got to go into places where other investors, and especially fund managers, fear to tread, or, more to the point, invest.

The share price of COSCO Corporation (Singapore) (SGX: F83) speaks volumes. From a high of S$2.40 just five years ago, the shares are now changing hands at S$0.45 – a drop of some 80%.

So, would Peter Lynch be tempted?

Lynch likes to look for companies that are valued at below their long-term Price-to-Earnings ratios. Over the last five years, COSCO has been valued at around 30 times earnings. Currently, it is valued at over 100 times historic earnings.

What’s more, with earnings expected to grow at only 18%, its Price-to-Earnings-Growth (PEG) ratio fails to meet Lynch’s strict criteria of a PEG ratio below one.

COSCO is also carrying a fair amount of debt. With Total Debt of S$5.3b and Total Equity of S$2.3b, the shipbuilder’s Debt/Equity ratio of 2.3 could also fail to meet Lynch’s stringent measure.

Additionally, with a cash pile of S$1.6b, the company has Net Debt rather than Net Cash, which could be another area of concern for Lynch.

The company does pay a dividend, though. That could be a positive. However, with earnings per share of S$0.01 and a payout of S$0.01, it would imply that COSCO has probably not retained enough profit to satisfy Lynch.

On balance, Peter Lynch is probably likely to give COCO Corporation (Singapore) a miss, at least until the financials look a bit more enticing.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.