StarHub Ltd’s Valuation: Then Vs. Now

StarHub Ltd (SGX: CC3) is one of the three main telecommunications companies in Singapore.

Over the last 12 months, StarHub’s share price has fallen by 18% due to a number of possible reasons, such as declines in its revenue and profit in the first three quarters of 2016 and the impending entrance of a fourth-player in Singapore’s telecommunications space.

StarHub’s double-digit share price decline has taken place even as the broader market, represented by the Straits Times Index (SGX: ^STI), has inched up by 2%. Given this, I thought it would be interesting to look at StarHub’s valuations in relation to history. The two valuation ratios I’m going to focus on are the price-to-earnings (PE) ratio and the dividend yield.

The chart below shows StarHub’s PE ratio over the past five years. As we can see, StarHub’s current PE of 15 is actually near a five-year low.

Source: S&P Global Market Intelligence

Next, we have StarHub’s dividend yield. At its current share price, the telco has a trailing yield of 6.8%. According to Reuters, StarHub has an average dividend yield of 5.31% over the past five years. It’s obvious that the company’s yield is lower than average at the moment.

A Foolish conclusion

In sum, StarHub has valuations that are either near five-year lows, or is significantly lower than average.

But when it comes to valuation ratios, it is important to note that low PE ratios and high dividend yields in and of themselves do not make a company a good investment. Companies that see their businesses crumble can still be lousy investments even if bought at low 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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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.