The Motley Fool

Is Venture Corporation a Buy Now After Declining 50%?

Venture Corporation Ltd (SGX: V03) is an electronics manufacturing services provider with expertise in a wide range of activities. Thus, investors might wonder whether Venture is a good buy now. My colleague Tim Phillips certainly thinks so, at least from a dividend perspective.

However, for me, there’s no quick answer to the question. Still, I’ll look at two aspects of the company to give readers a comprehensive overview of the attractiveness of the business as an investment idea.

Latest financial performance

One of the main worries that investors have for Venture is driven by the challenges that the semiconductor industry is currently facing. As a service provider for this industry, Venture’s business performance is expected to be affected by the industry’s weakness. Thus, we should be aware to what extent such challenges will impact Venture’s business and we can try to glean this from its latest quarterly results.

The good news here is that Venture actually reported growth in its first quarter of 2019. Both revenue and net profit were up by 8.5% year-on-year. According to the company, such performance came as a result of broad-based growth across its portfolio of technology domains. So far, so good then.

Valuation

Though Venture’s share price has declined significantly from its peak, we will still need to know whether its valuation is attractive before investing in the business.

There are many ways to approach a company’s valuation. Here, I’ll compare Venture’s valuation to the market average. 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).

The idea is simple: to find out whether the company is cheap or expensive when compared to the market average. And here are the numbers. Venture is trading at price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield of 1.8, 11.6 and 4.7%, respectively. Comparatively, the market average PB, PE and dividend yield are 1.0, 11.9 and 3.4%, respectively.

Overall, we can see that Venture’s valuation is comparable to the market average.

Conclusion

In sum, investors might want to carry out further research on Venture given that Mr. Market is quite pessimistic on the company now despite its positive financial performance.

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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