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QuestionsCategory: Valuation QuadrantRaffles medical valuation
Matthew asked 5 years ago

Hi victor,
May I ask your views on the current valuation of raffles medical based on PE ratio? usually for medical industry PE ratio is around 30x so at its current price and at PE ratio of 27X, would it be consider slightly undervalued?

1 Answers
Victor Chng answered 5 years ago

Hi Matthew,
Sorry for the late reply. Somehow I miss out your questions so sorry about that. 
Raffles medical’s share price had fallen a lot due to their earnings drop which was contributed from intense competition and China operation. The key is to understand the situation and ask yourself whether it is a temporary issue and whether they have chances that they are going to recover.
Their 10 years PE average is about 26x. Then again looking at valuation alone does not make any sense. you have to link it back to their situation as mentioned above. If the situation is temporary and chances of recovery is high than it may seemed undervalued but if it is the other way than more margin of safety is required to buffer any unforeseen issue.