The Nigerian Exchange Ltd (NGX) Consumer Goods Sector Index comprises twenty (20) FMCGs that deal in the manufacturing of a variety of consumer goods ranging from flour, sugar, beverages, beer and so on. Year-to-date, the performance of this sector has increased marginally by 2.25%. Although not the best of outcomes, the FMCG sector has witnessed better growth when compared to the banking and insurance sectors.
The article examines the cheapest FMCG stocks listed on the NGX. The five companies selected are those with the lowest Price to Earning (P/E) Ratio as it is widely believed that the lower the P/E ratio, the cheaper the stock. The P/E ratio compares the earnings of a company at a specific time period, relative to its price at the same period.
Based on this, the cheapest five (5) stocks include:
Presco Plc is an agro-industrial company engaged in the development of oil palm plantations, palm oil milling, palm kernel processing and vegetable oil refining. It specializes in the cultivation of oil palms and in the extraction, refining and fractioning of crude palm oil into vegetable oil and palm stearin.
Presco Plc currently has a market capitalization of N68 billion and shares outstanding of N31.40 billion. In Q1 2021, the agro-allied company reported an increase of 47.40% in revenue, while profit after tax appreciated by 113.33%, from N1.80 billion to N3.84 billion in the same period.
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The company recorded growth of 3.32% in total assets in the same period from N73.77 billion to N76.22 billion and earnings per share increased by 113.33% from N1.80 to N3.84.
Presco Plc has a P/E ratio of 13.30x and its share price is currently valued at N70.00. The company’s share price has a Year-to-date return of –1.34%.
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Nascon Allied Industries Plc is involved in salt refining and distribution. The company is engaged in the processing of raw salt into refined, edible and industrial salt. Its segments include Salt, Seasoning, Tomato, Vegetable Oil and Freight income.
Nascon Plc has a market capitalization of N39.74 billion. The company declared a 21.22% growth in revenue from N6.88 billion to N8.34 billion and reported N723 million profit after tax (PAT) in the first quarter of the year, to reflect a growth of 15.20%, despite the 15.20% increase in taxation.
Nascon’s total assets grew by 5.78% from N44.78 billion to N47.37 billion and its P/E ratio stands at 8.68x. It currently trades at N15.00.
The company’s share price has a Year-to-date return of 3.45%.
Dangote Sugar Plc
Dangote Sugar Refinery Plc is engaged in refining raw sugar into edible sugar and selling the product. The company is also engaged in the cultivation and milling of sugar cane.
The company has a market capitalization of N214 billion as of the time of writing this report.
Dangote Sugar Plc reported a growth of 41.46% in revenue for Q1 2021, while gross profit grew by 41.52% from N12.72 billion to N18.04 billion. Net profit for the same period appreciated by 30.30% from N6.37 billion to N8.30 billion.
In the same period, total assets appreciated by 5.48% from N276.76 billion to N291.94 billion year-to-date.
Similarly, earnings per share went up by 28.30% from N0.53 to N0.68 in the current period. The company has a P/E ratio of 7.15x and currently trades at N17.45.
Dangote Sugar’s share price has a Year-to-Date return of -0.85%.
Vitafoam Nig Plc
Vitafoam Nigeria Plc is a foam manufacturing company based in Ikeja, Lagos. It is one of Nigeria’s largest foam manufacturers, producing both flexible and rigid polyurethane products. The company also owns an interest in Vitafoam Ghana and Vitafoam Sierra Leone.
The company has a Market capitalization of N18.76 billion. It declared a 55.77% increase in revenue, while net profit appreciated by 47.34% from N1.69 billion to N2.49 billion. Total Assets also grew by 18.21% from N21.64 billion to N25.58 billion.
Earnings per share increased by 66.68% from N1.30 kobo to N2.17 kobo, with a P/E ratio of 5.06x.
Vitafoam Plc’s share price has appreciated by 96.79% year-to-date and it currently trades at N15.35.
Northern Nigeria Flour Mills Plc (NNFM)
Northern Nigeria Flour Mills Plc is a milling company in Nigeria that mills wheat and other grains and sells its products under the Golden Penny brand name. Products from NNFM include wheat flour, semovita, wheat offal, masaflour, germ flour, masavita and corn offal, Golden Penny flour, Golden Penny sugar and Golden Penny rice.
The company has a market capitalization of N1.10 billion and recorded a growth of 8.17% in net profit from N64.64 million to N69.92 million in the Audited Financial Statement for the year ended March 2021. In the same vein, earnings per share appreciated by 8.33% from N3.60 to N3.90.
The company declared a total asset of N7.37 billion at the end of the period. However, its share price has depreciated by –8.75% year-to-date. It has a P/E ratio of 3.34x and currently trades at N6.15.
Why this matters
There are two reasons why people invest. One, for capital appreciation and the other, for dividend returns. As investors go bargain hunting, they hope to purchase more for less. This article helps investors understand that price is not the only determinant of cheap equity.
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