Dangote Sugar Refinery Plc, the largest producer of the sweetener in Africa’s largest economy has the most attractive valuation in the consumer goods space.
The company has been sweetening investors’ hearts with good news of expansion plans, as its backward integration programme has been getting accolades from the government and foreign investors.
Dangote Sugar is a value stock as it boasts a forward price/earnings ratio — a common measure of the value the market puts on a business’s future profits — of 6.72 times as at March 27. This indicates the stock is cheap, which presents the right time for investors to buy the stock.
A growing number of consumer goods firms are ridiculously overvalued, and market participants do not see growth potential in them, and the beer makers are worst hit because they produce highly elastic goods that consumers can easily jettison for cheaper brands.
Nestle Nigeria has a price to earnings ratio of 27.8 times; Nigerian Breweries, 52.56 times; Cadbury Nigeria, 84.30 times; Honeywell Flour Mills times, and Nascon Allied Industries Limited, 8.80 times.
Unilever Nigeria, Gunnies Nigeria, and International Breweries do not have price to earnings multiples attached to their valuation metric because they posted loss as they capitulated to the coronavirus induced headwinds and inherent unfavorably macroeconomic environment.
The reason for Dangote Sugar’s attractive valuation is simply because its earnings have been growing steadily in relation to share price, a rare feat for a company operating in a country where household income is increasingly deteriorating.
Dangote Sugar is the best dividend paying consumer goods stock, which means it rewards shareholders more for taking risk in its business venture.
It has a dividend yield of 9.15 percent as at March 27, and that compares with Nestle Nigeria, (5.09 percent); Nigerian Breweries, (7.32 percent); Four Mills, (1.94 percent), and Cadbury Nigeria, (6.05 percent).