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Are QAF Limited’s Current Valuations High Or Low In Relation To History?

QAF Limited (SGX: Q01) is a food production company with three main business segments. They are Bakery, Primary Production, and Trading and Logistics. You can learn more about these segments from an earlier article I wrote.

Over the past five years, QAF has been a solid winner in Singapore’s stock market with its stock price having climbed by 131%. Given such strong gains, I thought it would be interesting to look at the company’s current valuations and compare them 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 QAF’s PB ratio over the past five years:

QAF's PB ratio over past 5 years
Source: S&P Global Market Intelligence

The chart above shows three things. Firstly, QAF’s PB ratio has traded as low as around 0.9 and as high as around 1.7 over the past five years. Secondly, the PB ratio has displayed a clear upward trend. Thirdly, QAF’s current PB ratio of 1.68 is clearly near a five-year high.

In the next chart below, we have QAF’s PE ratio over the past five years:

QAF's PE ratio over past 5 years
Source: S&P Global Market Intelligence

Interestingly, QAF’s PE ratio chart looks rather different from its PB ratio chart. The food producer’s PE ratio had reached a peak and trough of around 17.5 and 5, respectively, in the timeframe under study. The company’s PE ratio of 9.8 at the moment is also near the middle of the metric’s historical range over the past five years. It appears that QAF has become more adept in recent years at producing a profit from the shareholders’ equity it employs.

In sum, when compared to history, QAF has a high PB ratio but an average PE ratio.

For yet another perspective on QAF’s valuation, the SPDR STI ETF (SGX: ES3) has a PB and PE ratio of 1.2 and 12.6, respectively. The SPDR STI ETF is an exchange-traded fund that mimics the fundamentals of Singapore’s market barometer, the Straits Times Index (SGX: ^STI).

But in any case, it’s worth keeping in mind that none of the above is meant to be the final word on whether QAF will be a good or 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.