Healthcare companies are generally considered “defensive” stocks since their services are needed in both the good and the bad times. Given their defensive nature and the current fears in the market about a recession, it is not surprising to see that investors are attracted to these stocks.
For those who are seeking investment ideas in this sector, you might want to know which companies you should invest in. In this article, I’ll compare two companies that have exposure to this sector, namely Raffles Medical Group Ltd (SGX: BSL) and Singapore O&G Ltd. (SGX: 1D8).
What I want to find out here is which of the two is the better deal now for investors.
To find out which is cheaper, I’ll compare the valuation metrics of both companies. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
To begin with, Raffles Medical and Singapore O&G have PB ratios of 2.2 and 3.8, respectively. The low PB ratio for Raffles Medical suggests that it has a lower valuation.
Next, Raffles Medical and Singapore O&G have PE ratios of 26.1 and 22.8, respectively. Here, Singapore O&G appears to have a lower valuation.
Last but not least, the dividend yields for Raffles Medical and Singapore O&G are 2.6% and 4.2%, respectively. The higher a stock’s yield, the lower its valuation. Thus, we can see that Singapore O&G has the lower valuation in terms of the dividend yield.
From the above, we can argue that Singapore O&G is probably the cheaper stock among the two due to its low PE ratio and high dividend yield.
For investors, the main takeaway is that Singapore O&G is probably the better deal now due to its low valuation. Yet, investors should also consider the prospects of both companies before investing in their stocks.
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 Raffles Medical Holdings Ltd and Singapore O&G Ltd.