Forte Oil has been on my radar recently for the right or wrong reasons. They recently released their 9 months results which beats the expectations they set themselves (right reason). Their share price has also continued to gallop following my post just 4 trading days ago. It was then trading for N52.9 and has risen to N70.88 and rising. That rise indicates the stock has been rising at a CAGR of 7.6% for the last 4days. That is an astronomical rise!!!
But that is even small compared to its Year to date price. FO was just N7.73 as at the beginning of the year rising a whopping 917%. Its P.E ratio has thus jumped from 8.2x to 76x today. In fact, the current rise in share price is rising 1.77x faster than its earnings per share has risen between the Q1 results and the recently released Q3 results. At Q1 Eps was 18kobo whilst share price was N14.25 when it was released in April. By Q3 EPS rose to 46kobo and share price at was N64.3 when it was released October 10.
Based on current price the spread is now 1.95x (195%). Will the Eps rise this fast to justify this current valuation?? Speculators don’t usually worry about fundamentals. However, if you are looking to invest for the medium term this is definitely not a good price to buy. I don’t know if Forte Oil will ever drop to its April levels again buy if I didn’t consider it an attractive proposition the, I definitely won’t now.