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How Does Singapore Technologies Engineering Ltd’s Valuation Look Like Today When Compared To History?

Singapore-based engineering conglomerate Singapore Technologies Engineering Ltd (SGX: S63) has had a pretty good last 12 months in the stock market – in that period, its stock price has climbed by 18%.

I thus thought it would be interesting to have a look at the company’s valuations now and compare them 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.

The chart below shows how ST Engineering’s PB ratio has looked like over the last five years:

st-engineerings-pb-ratio-over-past-five-years
Source: S&P Global Market Intelligence

Turns out, ST Engineering’s PB ratio has ranged between 4.1 and 7.4 in the last five years. As such, the company’s current PB ratio of 5.4 is actually at the lower end of the aforementioned range.

The next chart shows ST Engineering’s PE ratio for the same period as the PB ratio chart:

st-engineerings-pe-ratio-over-past-five-years
Source: S&P Global Market Intelligence

Interestingly, ST Engineering’s P/E ratio has a different dynamic. This valuation measure is actually near a five-year high at 23.0 currently. This could be a sign that the company has become less adept at generating a profit with its assets.

A Foolish conclusion   

Based on what we have seen above, ST Engineering can’t be said to have low valuations in relation to history given that its P/E ratio is near a five-year high.

In any case, there’s something important to note when it comes to valuation ratios: Companies with a high (low) valuation in relation to history are not necessarily bad (good) investments. Companies that see their businesses crumble (grow tremendously) can still be lousy (great) investments even if bought at low (high) valutaions.

At the end of the day, valuation ratios are only one of the many aspects that investors should pay attention to with a company 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.