How Does Golden Agri-Resources Ltd’s Valuation Today Compare To History?

Golden Agri-Resources Ltd (SGX: E5H) is an integrated palm oil company with large oil palm plantations in Indonesia currently covering a total planted area of over 480,000 hectares.

As a vertically integrated firm, Golden Agri-Resources has a presence in the entire value chain of the palm oil industry, from the cultivation of the palm fruit to the manufacture of palm-based consumer products.

It also happens to be one of the largest companies in Singapore’s stock market given that it has a market capitalisation of S$5.48 billion and is one of the 30 companies within Singapore’s market benchmark, the Straits Times Index (SGX: ^STI).

Over the last 12 months, Golden Agri-Resources’ stock price is up by 21%, more than double the 10% gain enjoyed by the Straits Times Index. Given this market-beating performance, I thought it’d be interesting to compare Golden Agri-Resources’ current valuations with history.

The valuation metrics I want to focus on here are the price-to-book (PB) ratio and price-to-earnings (PE) ratio.

Here’s a chart showing how Golden Agri-Resources’ PB ratio has looked like over the past five years:

Source: S&P Global Market Intelligence

As we can see from the chart above, the PB ratio for Golden Agri-Resources had ranged from around 1 to 0.3 over the last five years. The company’s current PB ratio of 1 is clearly at the high end of where the valuation measure has been for the timeframe under study.

The next chart is for Golden Agri-Resources’ PE ratio over the past five years:

Source: S&P Global Market Intelligence (periods with a PE ratio of 0 are when the company had made losses)

Golden Agri-Resources’ PE ratio had hit heights of over 150 as the chart shows – but that was largely because of depressed earnings.

That being said, the company’s current trailing PE ratio of 12 is still rightfully in the middle of the historical trading range as the company has also traded at over 20 times earnings between 2013 and 2015.

So in sum, when compared to history, Golden Agri-Resources has a high PB ratio and an average PE ratio.

But this does not necessarily mean that Golden Agri-Resources will be a bad investment going forward. At the end of the day, valuation ratios are only one of many aspects about a company that investors should consider before making an investment decision. Take the data you’ve seen here merely as a useful starting point for further research.

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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.