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SATS Ltd’s Stock Price Is Near A 52-Week Low Now: Is The Stock Cheap?

SATS Ltd (SGX: S58) is a company with two business segments, namely, Food Solutions and Gateway Services. The former covers services such as airline catering, food distribution, and industrial catering. The latter is involved in ground handling services of passengers, flights, ferries, and cargo.

Over the last three months, SATS’s stock price has fallen by 8% to S$4.62 currently. That’s near a 52-week low of S$4.55. This raises an important question: Is SATS’s stock actually cheap?

There’s no easy answer since there are many ways to look at a company’s valuation. But, we can still get some insight by comparing SATS’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).

SATS currently has a PB ratio of 3.10, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.26. This makes SATS way pricier than the market based on the PB ratio. Similarly, SATS’s PE ratio is also much higher than that of the SPDR STI ETF’s (21.0 vs 11.4).

When it comes to the dividend yield, this is where SATS has the upperhand. At the moment, SATS has a dividend yield of 3.7%, which is higher than the market’s yield of 3.0%. (The higher the yield is, the lower a stock’s valued.)

In sum, we can argue that SATS is currently priced at a steep premium to the market given its significantly higher PB and PE ratios. Nevertheless, income investors may still be interested in the company since it has a dividend yield that is above the market average.

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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. Motley Fool Singapore has a recommendation for SATS.