United Overseas Bank Ltd (SGX: U11) is one of the three major banks based out of Singapore. Over the last 12 months, UOB’s stock price has increased by an impressive 19.3% to S$28.02 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 UOB’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).
UOB currently has a PB ratio of 1.33, which is higher than the SPDR STI ETF’s PB ratio of 1.21. It’s a similar picture with the bank’s PE ratio (13.5 vs. the SPDR STI ETF’s PE ratio of 11.09). On the other hand, UOB has a higher dividend yield of 3.57%, compared to the market’s yield of 2.89%. The higher a stock’s yield is, the lower is its valuation.
When I put it all together, I can argue that UOB is currently trading at a premium to the market.
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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. The Motley Fool Singapore has a recommendation for United Overseas Bank.