Want To Invest In Sembcorp Marine Ltd (SGX:S51) Today? Read This First

Sembcorp Marine Ltd (SGX:S51) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of SGD2.09 is based on unrealistic expectations. Let’s look into this by assessing S51's expected growth over the next few years. See our latest analysis for Sembcorp Marine

What are the future expectations?

Sembcorp Marine is poised for significantly high earnings growth in the near future. The consensus forecast from 17 analysts is extremely bullish with earnings per share estimated to rise from today's level of SGD0.007 to SGD0.074 over the next three years. This results in an annual growth rate of 55.87%, on average, which signals a market-beating outlook in the upcoming years.

Is S51 available at a good price after accounting for its growth?

Sembcorp Marine is available at price-to-earnings ratio of 311.94x, showing us it is overvalued based on current earnings compared to the machinery industry average of 11.77x , and overvalued compared to the SG market average ratio of 14.07x .

After looking at S51's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, since Sembcorp Marine is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 311.94x and expected year-on-year earnings growth of 55.87% give Sembcorp Marine a punchy PEG ratio of 5.58x. This tells us that when we include its growth in our analysis Sembcorp Marine's stock can be considered somewhat overvalued , based on fundamental analysis.

What this means for you:

S51's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Is S51’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Past Track Record: Has S51 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of S51's historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.