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Generally, being a successful investor in any market requires that you understand the big picture of the economy and the dynamics of the stock market.
Every economy comprise of socio-political and business environments that influence business activities and also drive the nation’s development and growth.
And this economy often goes through boom and gloom cycles with the boom stage comprising the early, middle and late expansion periods; while the gloom stage comes in form of the early and late periods of contraction.
Typically, a gloomy economy is synonymous with a weak and unpredictable stock market.
In order to be successful as an investor, you must identify the stage your economy is at that time and which sector, industry and company can do well at this stage by remaining in business and posting good earnings that support its share price and dividend payout in future.
In 2017, industry experts revealed that the Nigerian stock market did quite well. In fact, it was reported to be one of the best performing ones in the world as the Nigerian Stock Exchange returned 42%. It is expected that this trend will continue in 2018 which is why you should be looking to buy stock his year if you want to grow your networth.
Best Stocks to Buy in the Nigerian Stocks Exchange
In this post, we’ve highlighted the best stocks to buy in the Nigerian Stock Exchange in 2018.
FCMB is a tier 2 bank that has enjoyed steady growth over the years. In 2017, profit before tax dropped from N14.1 billion to N6.8 billion which was largely due to the absence of N33 billion in extraordinary gains from foreign exchange. Impairments also dropped from N34.4 billion in 2016 to N12.6 billion in 2017.
FCMB is currently trading at 5.5 times earnings and has a price to book ratio of 0.1. Price to book ratio is calculated by dividing the latest stock market price of a stock by its book value per share while the book value per share is calculated by subtracting a company’s assets from its liabilities. A low price to book ratio means that a stock is undervalued.
Eterna Oil is a public quoted company. It was incorporated in January 1989 and was registered as a public limited company in 1997.
Currently, the stock of this company is trading at a price earnings ratio of 3.96, which suggests that there may still be room for significant upside. Additionally, results from the third quarter ended September, 2017 show that the company has exceeded its full year (FY) 2016 revenue and earnings per share targets.
As at September 2017, revenue was N125 million compared to N106 million earned in December, 2016. The profit after tax at that same period was N2 billion compared to the N1.4 billion made in December, 2016.
Earnings per share as at the third quarter ended in September 2017 which was N1.55, compared to FY 2016 figures of N1.13. This suggests that the company could very likely exceed its 2016 dividend payment. Eterna paid a dividend of 30 kobo per share for the financial year ended December, 2016.
Also, the Federal Government in an attempt to maintain or possible improve petrol prices is considering a special foreign exchange window for petroleum marketers, as well as tax incentives. These measures could lead to a rebound in profits for the various companies operating in this sector.
Caverton is another public traded company that had a great 2017 and any smart investor should be looking to buy their stock
The company’s 2017 result revealed that the turnover increased from N14.4 billion in 2016 to N14.8 billion in 2017. Profit before tax also increased from a loss of N955 million in 2016 to N1.8 billion in 2017.
Also, the company signed a 5 year contract in 2017 with Chevron Nigeria Limited to provide medical evacuation services.
Currently, Caverton is trading at a price to earnings ratio of 1.67 and a price to book ratio of 0.3.
Total Nigeria is one of the major oil companies in the country. The company is involved in oil marketing, distribution and energy.
Total Nigeria boasts of strong financials that have supported its price for the last five years in a row.
Currently, the company is well positioned in the downstream oil marketing sector with the crude oil price in the international market been a plus.The stock trades at 10.91x earnings with a dividend yield of 12.37%.
Mobil is another major oil company with a focus on oil marketing and distribution. The company is also involved in the real estate business. The recent hike in pump price of fuel has started reflecting on its bottom line. Also, the company’s property business has been doing quite well.
Overall, the increasing earning power of the company has supported its share price and dividend payment over the years.
Zenith Bank is one of the tier 1 banks in the country. The bank is particularly known for its aggressive marketing, relationship building as well as its strong ICT drive that has enabled the bank rank among the biggest in the continent and Nigeria’s top three banks in Nigeria.
In terms of trading, the stock is quite attractive with good potentials after the weak earnings season and market fundamentals had depressed it share price.
Overall, the bank’s performances have been impressive irrespective of the FX revaluation that boosted its results in recent times.
Guaranty Trust Bank
GTB as it is popularly called is another tier 1 bank that has shown good results in the stock market.
In 2017, the bank’s profitability level hit N120 billion to top the industry in gross earnings and profit. Also, its corporate and retail banking preference and strong service culture have enabled it record consistent year on year growth in customer base and these have impacted on its bottom line to support its dividend payout policy.
Additionally, the bank’s strong professionalism in operations and good technology has helped in delivering satisfactory services to its customers at all times.
GTB does extremely well in terms of return on equity. The company has been consistent in dividend payment in the last five years and the stock trades at 5.86x earnings and a yield of 6.68%.
These divisions under the Dangote Group have been doing quite well and this is no better time to invest in their stock.
Currently, Dangote Sugar’s stock is reasonably valued at its current 7.44x earnings with dividend yield of 8%, with its upside potential from the price.
Additionally, the company’s expanded marketing and distribution outlets within and outside the shore of the country is expected to attract foreign currency boost profit that will support price.
On the other hand, Dangote Cement has been involved in projects and expansion of its operations into 18 other African countries.
Currently, the company is the most capitalized stock on the exchange and the most priced in its sector.