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Here’s How Cogent Holdings Ltd’s Valuation Compares With The Overall Market

Cogent Holdings Ltd (SGX: KJ9) is a logistics management service provider in areas such as transportation, warehousing, container depot, automotive and more. The company also has a property management arm and currently acts as the master-tenant of The Grandstand, the former Turf Club.

Over the past five years, Cogent’s stock has risen by 650% in price. This performance caught my attention and got me thinking: Is the stock expensive after such a large run up? There is no easy answer, but we can get some insight by comparing Cogent’s current valuations with the market’s.

The two valuation metrics I will focus on are the price-to-book (PB) ratio and price-to-earnings (PE) ratio. I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).

Here’s a chart showing the PB ratios of Cogent and the SPDR STI ETF:

PB ratios for Cogent and SPDR STI ETF
Source: S&P Global Market Intelligence and SPDR STI ETF website

At Cogent’s current stock price of S$0.79, it has a PB ratio of 3.0, which is over twice the STI ETF’s PB ratio of 1.25. From the perspective of the PB ratio alone, Cogent can thus be said to be 140% more expensive than the market average.

The next chart we’re studying is for the PE ratios of Cogent and the market:

PE ratios for Cogent and SPDR STI ETF
Source: S&P Global Market Intelligence and SPDR STI ETF website

Despite Cogent having a higher PB ratio than the market, the company turns out to have a lower PE ratio when compared to the SPDR STI ETF. This time, Cogent has a PE ratio of 11.8, which is around 11% cheaper than the ETF’s PE ratio of 13.2.

A Foolish conclusion   

To sum up what we’ve seen, we can argue that Cogent is currently priced at a premium to the market, taking into account the company’s higher PB ratio and marginally lower PE ratio.

But, it’s worth noting that none of what we’ve seen above should be taken as the definitive word on whether Cogent will be a poor or good investment going forward. Valuation metrics are just one of the many important aspects about a company that investors should study before any investing decision can be reached.

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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.