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Wednesday, March 29, 2023

Flour Mills is Best Consumer Stock Money Can Buy

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Flour Mills of Nigeria is coming out of the blues to become the most attractive consumer goods stocks and it is expected that investors will be taking positions in a company with future growth prospects.

It has a price multiples of 3.35 times earnings, beating peer rivals such as Nascon Allied and Industries (13.31 times), and Dangote Sugar (7.31 times).

Many investors will say that it is better to buy shares in companies with a lower P/E because this means you are paying less for every Naira of earnings that you receive. In that sense, a lower P/E is like a lower price tag, making it attractive to investors looking for a bargain.

Analysts are sanguine that Flour Mills stock will rally on the back of expansion plans which will add impetus to earnings.

The company’s numbers are propitious, riding on the relaxation measures and improved consumption capabilities. It benefitted from the border closure that crimped competitors and magnified demand for its product.

Flour Mills has continued to hold fort despite macro-economic headwinds since 2015, and the essentiality of its produce was the reason it surmounted the coronavirus pandemic as it recorded double growth in earnings.

It continues to expand its investments in backward integration and the sustainable development of the critical aspects of the food value chain, including Grains, Starch, Feeds and Proteins, Oils and Fats, and Sugar.

To demonstrate its commitment to the success of the National Sugar Master Plan, the consumer goods giant will continue to uphold the tenets of the National Sugar Master Plan and expand investments for the sustainable development of the Sugar industry.

To consolidate its position in the market, the largest miller by market capitalization in Africa’s most populous nation acquired a majority stake in Honeywell Flour Mills.

Its sales were up 24.15 percent to N824.98 billion in December 2021 from N555.34 billion the previous year.

The elephant in the room, however, remains the concern around exchange rate and how it impacts the cost structure of the company as costs make up 90 percent of sales leaving a slim margin.

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