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Sheng Siong Group Ltd’s Valuation: Today vs. History

Sheng Siong Group Ltd (SGX: OV8) was established in 1985 and has steadily grown into one of the largest supermarket chains in Singapore today. The company, which listed its shares in August 2011, has a network of 41 stores right now that are primarily located in the heartlands of the island.

Sheng Siong has been a solid performer since its listing – its shares have gained 216%! Given such a strong return in a little over five years, I thought it’d be interesting to have a look at Sheng Siong’s valuations in relation to history. I’m going to focus on two ratios, namely, the price-to-earnings (PE) ratio and price-to-book (PB) ratio.

At Sheng Siong’s current stock price of S$1.09, it has a PE ratio of 26.9. Here’s a chart showing the company’s PE ratio over the last five years:

sheng-siongs-pe-ratio-over-past-five-years
Source: S&P Global Market Intelligence

As you can see, Sheng Siong’s PE ratio had increased from around 11 five years ago to 26.9 right now, which is near a five-year high. The company’s PB ratio is also in a similar situation.

sheng-siongs-pb-ratio-over-past-five-years
Source: S&P Global Market Intelligence

Sheng Siong has a PB ratio of 6.5 at the moment and the chart just above makes it clear that this is near a five-year high.

To sum up the two charts, Sheng Siong has seen its valuations climb over the last five years.

When it comes to valuation ratios, it is important to note that high PE and PB ratios in and of themselves do not make a company a lousy investment. Companies that are able to grow their businesses strongly can still be great investments even if bought at high valuations.

Valuation ratios are only one of the many aspects about a company that investors should consider before making an investment decision.

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Editor's note: Sheng Siong's share price was mistakenly stated as S$1.93 previously. The error has been corrected. The Fool regrets the error.

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.