At the current level of S$1.54, M1 Ltd‘s (SGX: B2F) share price is just 2.0% higher than a 52-week low of S$1.51. This could raise an important question among investors: Is Singapore’s smallest operational telco – in terms of market share – a bargain?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing M1’s current valuation ratios with the market’s. The three metrics I will focus on are the price-to-book (PB) ratio, the price-to-earnings (PE) ratio, and the 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).
M1 currently has a PB ratio of 2.8, which is higher than the SPDR STI ETF’s PB ratio of 1.1. But, M1’s PE ratio is slightly lower than that of the SPDR STI ETF’s (10.7 vs. 10.8). In addition, the telco’s dividend yield of 7.3% is twice the market’s yield of 3.6% – the higher a stock’s yield is, the lower is its valuation.
In sum, we can argue that the M1 share price is at a discount to the market given its lower PE ratio and higher dividend yield.
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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.