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This Cash-Rich Stock Has Plunged 38% in 2019. Is it Time to Buy?

HRnetGroup Ltd (SGX: CHZ) is the largest recruitment firm in Asia ex Japan. It was listed two years ago on the Singapore stock exchange. HRnet recently caught my attention as it share price is trading at 52-week low of S$0.56 (as of writing).

What’s more, it has plunged by 38% from its 52-week high price of S$0.90. Personally, the very first question that I have in my mind now is whether the stock is cheap. This question is important because if the firm’s shares are cheap, I might take some time to learn more about the company’s future prospects.

Clearly, there is no easy answer. However, we can still get some insight by comparing HRnet’s current valuations with the market’s valuations. 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).

HRnet currently has a PB ratio of 1.7, which is higher than that of the SPDR STI ETF’s PB ratio of 0.9. Similarly, its trailing PE ratio is 11.5, is slightly higher than the SPDR STI ETF’s PE ratio of 10.2.

Yet, its current dividend yield of 5.0% is higher as compared to the market’s yield of 3.9%. The higher a stock’s yield is, the lower its valuation.

Foolish takeaway

From the above, HRnet does not appear to be cheap enough for me to carry out the next step of my normal research process (I might change my mind, however).

Yet, investors who are already interested in the company may be enticed by its current low share price. Moreover, HRnet has about S$274 million net cash on its balance sheet as of 30 June 2019, which will provide investors a good margin of safety – particularly when it comes to paying its dividend.

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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 recommended the shares of HRnetGroup Ltd.