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United Overseas Bank Ltd’s Valuation: Today vs. History

United Overseas Bank Ltd (SGX: U11) is one of the three major banks based out of Singapore.

Right now, the banking industry is facing headwinds as a result of Singapore’s slowing economic growth and challenges faced in the oil & gas industry. As a result, some of the banks’ shares have fallen over the past year.

Interestingly, UOB’s share price has remained more or less unchanged since 23 September 2015.

As such, I thought it could be insightful to look at UOB’s valuations today and compare them with their historical ranges over the past five years. In here, I’m focusing on the price-to-book (PB) ratio and price-to-earnings (PE) ratio.

UOB has a share price of S$18.80 right now. This gives the bank a PB ratio of 0.97. As you can see in the following chart, the bank’s PB ratio is near a five-year low right now.

uobs-pb-ratio-from-23-september-2011-to-23-september-2016
Source: S&P Global Market Intelligence

The next chart shows UOB’s PE ratio over the past five years. In a similar manner to its PB ratio, UOB’s current trailing PE ratio of 9.7 is near a five-year low.

uobs-pe-ratio-from-23-september-2011-to-23-september-2016
Source: S&P Global Market Intelligence

The two valuation metrics we’ve looked at with UOB are both near five-year lows. This could be a reflection of the worries that investors have with banks, despite UOB’s share price having stayed flat over the past year, as already mentioned.

In any case, It is important to understand that valuation metrics are only one of the many aspects about a company that investors should consider before making any investment decision.

Other qualitative factors such as the company’s future growth potential and quality of management must also be considered.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.