Why Standard Chartered PLC Provides Exceptional Value For Money

In this article I am looking at why I believe Standard Chartered (LSE: STAN) is a snip at current prices.

Price to Earnings (P/E) Ratio

According to current broker projections, Standard Chartered is on course to traverse current difficulties in key emerging markets and punch solid earnings growth of 27% this year before punching a further 9% advance in the following 12-month period.

These figures leave the bank dealing on a P/E multiple of 10.6 for this year, and which falls below the generally regarded bargain benchmark of 10 times tipped earnings or under — at 9.7 — for 2015. These figures also put to shame a forward average of 14.7 for the entire banking industry.

Price to Earnings to Growth (PEG) Ratio

Indeed, Standard Chartered’s explosive growth potential through this year and next are underlined by impressively-low PEG ratios Standard Charteredwhich register some way below the value watermark of 1 times.

Based on current share prices the banking giant deals on a PEG multiple of 0.4 for 2014, and although this moves to 1.1 for next year, this still creates excellent bang for your buck in my opinion. These figures also take the cleaners a forward mean of 1.3 for the rest of the banks sector.

Market to Book Ratio

After removing total liabilities from total assets, Standard Chartered is left with a book value of £28.03bn. This reading creates a book value of £11.60 per share which — at current share prices — produces a market to book ratio of 1.2.

A reading around 1 is generally regarded as a nailed-on bargain, so in this regard Standard Chartered can be considered as great value.

Dividend Yield

Even though weakness in key geographies has crimped earnings in recent times, Standard Chartered has managed to keep annual dividends moving in the right direction. And forecasters expect the full-year payout to continue rising during the medium term at least, with last year’s 86 US cent per share dividend anticipated to rise to 88 cents this year and to 94 cents in 2015.

These figures create sizeable yields of 3.9% and 4.2% respectively, easily surpassing a forward average of 3.2% for the FTSE 100.

A bargain at current prices

Enduring concerns over the bank’s performance in developing regions has hampered investor appetite for Standard Chartered in recent times, and the firm was recently trading at levels seen at the turn of the year.

But in my opinion the bad news surrounding the bank seems to have been factored into the price, and I believe that Standard Chartered’s restructuring strategy to revitalise its weighty presence in growth geographies makes it an excellent stock selection.

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Royston does not own shares in Standard Chartered. The Motley Fool owns shares in Standard Chartered.