MENU

1 Reason To Dislike SATS From The Perspective Of A Dividend Investor

In the previous article, we looked at two reasons to like SATS Ltd (SGX: S58) if you are a dividend investor. Given that there are always two sides to a coin, it will therefore be useful for us to look at the other side of the coin as well. Here, we will look at one reason not to like SATS, especially if you are a conservative dividend investor.

Valuation

The main reason to dislike SATS is due to its valuation. Let me explain further by using two simple metrics – the price to book (P/B) and price to earnings (P/E) ratio.

Below are the comparisons of these two metrics to the market average, using the STI ETF (SGX: ES3), to give us a better perspective.

P/B Ratio

*Source: Google Finance at price $5.01

As we can see from the chart above, the P/B ratio for SATS is about 2.9 times that of the STI ETF.

As such, assuming everything else being equal and that P/B ratio is used as the sole criterion for valuation, SATS is trading at 190% more than the market average.

P/E Ratio

*Source: Google Finance at price $5.01

From the chart above, we can see that SATS’ P/E ratio is about 166% of the market average.

This suggest that if P/E ratio is used as a sole metric for valuation, the firm is trading at a 66% premium to the market average.

In summary, we can see that SATS is trading at a premium to the market and this might be a reason for dividend investors to dislike SATS.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore has a buy recommendation for SATs. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.