There are several reasons why you should invest in the Nigerian Stock Exchange and there are several reasons why you probably should not. The Nigerian stock market is perhaps the only market where a stock can be trading in multiples 100 times its profits even though it just declared a poor result. It is also a market where a stock that has just released a great result will be trading at just twice its profits. P/E ratios are hardly the best metrics for valuing stocks.
This peculiarity is perhaps why Forte Oil share price has consistently traded at a price multiple of between 80 and 100 times its earnings per share without the market . The company began the month at a price of about N184.5 just shortly after it released its 2015 Half year results which we analysed accordingly.
We did suggest at the time that we only saw an upside for this stock despite the fundamentals being an odds with the price. The stock was the best for the month of August gaining a whopping 32.9%.
|1 Day Change||5||2.1|
|1 Week Change||9.27||-3.56|
|1 Month Change||35.44||-5.88|
|6 Month Change||17.1||-4.28|
|52 Week Change||10.67||-30.33|
So why the rally and will it last?
From all indications Nairametrics believes this rally is mostly influenced by an impending announcement. We have heard rumors that the company is set to raise (or may have even raised) some capital for it to be able to compete effectively in the upstream space.
Predicting how long the rally will last is dicey. It has gained over 30% already this month and could still have another 10-15% capabilities. It gained 5% on Friday alone and as kept up volumes at about 200,000 units a day or about N45million in value. The relative strength index shows it is over bought at over 80x but relying on technicals for this stock will be as foolhardy as relying on fundamentals.
Technicals and fundamentals should be out of the window when the upper trajectory of a stock is being propelled by some ‘friendly’ inertia.