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How Does Singapore Exchange Limited’s Valuation Today Compare To History?

Singapore Exchage Limited (SGX: S68) is the only stock exchange operator in town when it comes to Singapore. But the company runs more than a stock exchange – it also has fixed income and derivatives businesses, and provides market data services amongst others.

At the company’s current stock price, it is only 12% higher than its 52-week low. I thus thought it’d be interesting to look at Singapore Exchange’s valuations in relation to history. The two valuation ratios I’m going to focus on are the price-to-book (PB) ratio and the price-to-earnings (PE) ratio.

Here’s a chart that shows how Singapore Exchange’s PB ratio has changed over the last five years:

singapore-exchanges-pb-ratio-over-past-five-years
Source: S&P Global Market Intelligence

For the period under study, Singapore Exchange’s PB ratio has ranged from around 7.5 to over 11. The company’s current PB ratio of 9 falls in the middle of that range.

Moving on to the PE ratio, we can see Singapore Exchange’s PE ratio over the last five years in the chart below:

singapore-exchanges-pe-ratio-over-past-five-years
Source: S&P Global Market Intelligence

We can observe that Singapore Exchange traded at PE ratios of between 20 and 29 in the last five years. Currently, the company has a PE ratio of 23.9, which is at the lower end of the ratio’s historical range.

A Foolish conclusion   

Given the two charts we’ve seen, Singapore Exchange is clearly not carrying historically high valuations at its current price.

But there’s something important to note when it comes to valuation ratios: Even if a company has a low PE and PB ratios in relation to history, it does not mean it will be 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. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.