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Singapore Technologies Engineering Ltd’s Stock Is Near A 52-Week Low Now: Is It Actually Cheap?

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Singapore Technologies Engineering Ltd (SGX: S63) is a large engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

At its current price of S$3.23, ST Engineering’s stock is just 2.2% higher than a 52-week low of S$3.16. This may raise a question among investors: Is ST Engineering actually cheap now?

Unfortunately, there is no easy answer. But, we can still get some insight by comparing ST Engineering’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).

ST Engineering currently has a PB ratio of 4.8, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.30. It’s a similar story with the PE ratio, as ST Engineering has a higher earnings multiple than the SPDR STI ETF (19.6 vs 11.45).

But, ST Engineering has the higher dividend yield of 4.7%; the SPDR STI ETF’s yield is 2.96%. The higher a stock’s yield is, the lower is its valuation.

Putting it all together, we can argue that ST Engineering is trading at a premium to the market average despite the engineering conglomerate having a more attractive dividend yield; that’s because the company has higher PB and PE ratios.

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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.