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Singapore Exchange Limited’s Stock Is Near A 52-Week Low Now: Is It A Bargain?

Singapore Exchange Limited (SGX: S68) is a company that likely needs no introduction given that it runs the only stock exchange in town.

Singapore Exchange’s current stock price of S$7.26 is just 0.8% higher than a 52-week low of S$7.20. This may raise a question among investors: Is the company a bargain now?

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

Singapore Exchange currently has a PB ratio of 7.98 times, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.23. It’s a similar picture with the PE ratio, since Singapore Exchange’s earnings multiple is twice that of the SPDR STI ETF’s (22.7 vs. 11.4). On the other hand, Singapore Exchange has a higher dividend yield of 3.8%, as compared to the market’s yield of 2.96%. The higher a stock’s yield is, the lower is its valuation.

Putting it all together, we can argue that Singapore Exchange is trading at a premium to the market average, given its higher PB ratio and PE ratio. Income investors may still find the company’s market-beating dividend yield attractive, but it’s worth noting that a stock’s yield says nothing about its ability to sustain its dividend payouts.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for Singapore Exchange Limited.