Sarine Technologies Ltd (SGX: U77) is an Israel-based Company engaged in developing, manufacturing, marketing and selling precision technology products for processing of diamonds and gemstones.
At the current price of S$0.42 (at the time of writing), Sarine’s shares are down 63% from its 52-week high price of S$1.14. This raises a question: Is Sarine’s stock cheap now? This question is important because if the firm’s shares are cheap, it might be a good buying opportunity for investors.
Unfortunately, there is no easy answer. However, we can still get some insights by comparing Sarine’s current valuations with that of the market. 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).
Sarine currently has a PB ratio of 2.3, which is higher than the SPDR STI ETF’s PB ratio of 1.2. Also, its PE ratio is higher than that of the SPDR STI ETF’s (19.1 vs 13.0). On the other hand, the company’s dividend yield of 7.0% is much higher than the market’s yield of 3.5%. The higher a stock’s yield is, the lower is its valuation.
In sum, we can argue that Sarine is priced at a premium to the market average due to its high PB ratio and PE ratio. Nevertheless, income investors might still be attracted to the company due to its high 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.
Motley Fool Singapore 2019