Oversea-Chinese Banking Corp Limited (SGX: O39) is one of the three major banks based out of Singapore.
Over the last 12 months, OCBC’s stock price has increased by an impressive 24.6% to S$13.05 currently. This raises an important question: Is it an expensive stock now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing OCBC’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).
OCBC currently has a PB ratio of 1.42, which is higher than the SPDR STI ETF’s PB ratio of 1.21. It’s also a similar picture with the bank’s PE ratio (12.54 vs. the SPDR STI ETF’s PE ratio of 11.42). On the other hand, OCBC has a slightly higher dividend yield of 3.0% when compared to the market (a yield of 2.81%). The higher a stock’s yield is, the lower is its valuation.
When I put it all together, I can argue that OCBC is currently trading at a premium to the market, given its higher PB and PE ratios.
How We Made an 88% Return in Just 19 Months! Members of David Kuo’s personal investing club Stock Advisor Gold were recently rewarded with the biggest winner Motley Fool Singapore has seen to date In a special, 100% FREE report we’ve put together, we take you behind the scenes to show you exactly how we first uncovered this stock… every article and piece of research we released on it… and what ultimately led to our decision to SELL for an 88% gain. Click here to claim your copy now!
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.