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Raffles Medical Group Ltd Is Near A 52-Week Low: Is It A Cheap Stock Now?

Raffles Medical Group Ltd (SGX: BSL) is a healthcare services provider. It runs a hospital in Singapore, is currently developing a hospital in China (with an expected completion date of 2018), and has a network of medical facilities in 13 cities across five countries (Singapore, China, Japan, Vietnam, and Cambodia).

At Raffles Medical’s current stock price of S$1.42, it is near a 52-week low price of S$1.38. Given this, investors may be interested to know if the company’s cheap right now.

There is no easy answer since there are many ways to look at a company’s valuation. But, we can still get some insight by comparing Raffles Medical’s current valuations with the market’s.

The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield. 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 Raffles Medical and the SPDR STI ETF:

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

Raffles Medical currently has a PB ratio of 3.7, which is over three times the SPDR STI ETF’s PB ratio of 1.2. So, Raffles Medical is clearly pricier than the market based on the PB ratio.

The next chart shows the PE ratios of Raffles Medical and the SPDR STI ETF:

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

We can see that Raffles Medical’s PE ratio (35) is much higher than the market’s (13.1). So, the healthcare services provider is also way pricier than the market when seen from the vantage point of the PE ratio.

We’re down to the last valuation measure – the dividend yield. Here’s a chart showing the yields of Raffles Medical and the SPDR STI ETF:

Dividend yields for Raffles Medical and the SPDR STI ETF
Source: S&P Global Market Intelligence and SPDR STI ETF website

In terms of the dividend yield, Raffles Medical has once again lost out to the market. The healthcare services provider has a yield of just 1.4%, whereas the SPDR STI ETF has a yield of 3.0%. (The higher the yield is, the lower a stock’s valued.)

To sum up what we’ve seen,  Raffles Medical is currently priced at a premium to the market despite its stock price trading close to a 52 week low. The company has a higher PB ratio, higher PE ratio, and lower dividend yield.

But, it’s worth noting that none of what we’ve seen above should be taken as the definitive word on whether Raffles Medical 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.

The question investors need to ask themselves is this: Is the high valuation of Raffles Medical justifiable by its future prospects?

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.