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Are M1 Ltd’s Current Valuations High Or Low Compared To History?

M1 Ltd  (SGX: B2F)  is currently the smallest operational telco in the Singapore market. Over the last 12 months, M1’s stock has been a painful holding for its investors as it has declined by 20%.

This sharp fall got me interested in comparing the company’s current valuations with history. The valuation metrics I want to focus on here are the price-to-earnings (PE) ratio and dividend yield.

Here’s a chart illustrating M1’s PE ratio over the past five years:

M1's PE ratio over past 5 years
Source: S&P Global Market Intelligence

From the chart above, we can see that M1’s current PE ratio of 12.6 is actually near a five-year low; over the past five years, M1’s PE ratio has ranged between 11.1 and 21.6, and averaged at 16.7.

The next chart plots M1’s dividend yield over the past five years:

M1's dividend yield over past 5 years
Source: S&P Global Market Intelligence

Right now, M1 has a yield of 5.67%. This is near a five-year high and is actually higher than the average yield seen for the timeframe under observation. (The higher the dividend yield, the lower is the valuation.)

So, on the whole, M1’s valuations have favourable comparisons with history. But, it’s worth keeping in mind that none of the above is meant to be the final word on whether M1 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. Other qualitative factors such as a company’s future growth potential and quality of management must also be taken into account.

Right now, Singapore’s telco industry is undergoing significant changes due to the addition of a fourth player, Australia’s TPG Telecom. It is vital that investors pay attention to how well M1 is coping with this change.

 

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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.