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It is glaring that the outlook of the consumer goods sector is dim amid operating challenges such as cash scarcity, severe foreign exchange scarcity, deteriorating infrastructure, spiking borrowing costs, and inflationary.
However, the sector should not be written off like bad debt as there are stocks that investors can add to their watch list because of their attractiveness and growth prospects as they have been able to ride out of the storm.
Dangote Sugar Refinery Plc, Flour Mills of Nigeria Plc, and Northern Nigeria Flour Mills (NNFM) are consumer goods stocks that are trading at a lower price to earnings (P/E) ratio than industry average.
P/E (Price to Earnings) ratio demonstrates the ratio of the current price of a company’s share in relation to its earnings per share (EPS), which is a common metric for evaluating the value of a stock.
In some instances, a company’s share price is considerably higher than its industry P/E, indicating that the stock is expensive. This advises investors to avoid making substantial investments in such priced enterprises since it implies excessive speculation.
If, on the other hand, a company’s P/E ratio is lower than the industry average, it suggests that its stock prices are undervalued in proportion to its earnings. This is viewed as a positive investing indication by value investors. This method can help investors avoid value traps
Of course, Meristem Securities Limited in a recent report have place Buy ratings on the stocks of Dangote Sugar and Flourmills price targets of N30.14 and N36.95, respectively.
Flour Mills of Nigeria Plc
Flour Mills of Nigeria Plc is engaged in flour milling; production of pasta, noodles, edible oil and refined sugar; production of livestock feeds; farming and other agro-allied activities; distribution and sale of fertilizer; manufacturing of laminated woven polypropylene sacks and flexible packaging materials; operation of terminals A and B at the Apapa port, and customs clearing, forwarding and shipping agents and logistics.
The company’s price to earnings ratio is 6.22, which is lower than the industry average of 14.31, signifying that the stock is trading at a lower price, and it has an Earnings per share of 5.13.
The revenue climbed 36.98 percet year-on-year, rising to N1.13 trillion in nine month ended 2022-2021 from N824.98 billion.
Dangote Sugar Refinery Plc
Dangote Sugar Refinery Plc is a Nigeria-based company, which is engaged in the refining of raw sugar into edible sugar and the selling of refined sugar.
The Company’s products are sold through distributors across the country. Its business provides value-added support services, including logistics, supply chain management, credit and risk advice, sales and merchandising.
Its refining operations are supported by warehouses located strategically across the country. Its products include Dangote Vitamin A fortified refined granulated fine white sugar and Dangote Refined Unfortified.
With a market value of N29.40, the firm falls into the large-cap category. The company’s shares has gained 80.69 percent since the start of the year, outperforming the NGXASI index of 26.38 percent as of July 21. It has low debt in its capital structure.
The price to earnings ratio of the firm is 6, which is lower than the industry P/E of 14.31, indicating that the stock is at a lower price, and has Earning per share of 4.83 percent.
Year on year, revenue increased 8.23 percent, going to N102.22 billion from N94.44 billion as at March 2022. It has a little debt in its capital structure.
The company has a year to date of 80.91 percent that outperforms the NGXASI index of 26.83 percent.
Northern Nigeria Flour Mills (NNFM)
Northern Nigeria Flour Mills Limited is a Nigeria-based company engaged in milling of wheat, sorghum, maize and similar grains. The Company’s services include Toll Milling, Fortification and Ready-to-Use Supplementary Foods (RUSF).
The Company’s products include Masavita, Masalina, Semovita, Semolina, Sorghum Flour, MaiKwabo Flour, Dawavita and Masaflour.
The company’s price to earnings ratio of 8.03, which is lower than the industry P/E ratio of 14.31amd it has an earnings per share of N1.55.