PEG Ratio for Nigeria Banking Stock
The banking stocks recently led the bullish run that started the long expected market recovery, buoyed by economic data and indices pointing to early signs that the economic is recovering from the recession mode it slipped last year.
The recession had showed up by way of heighten non-performing loans in the books of Nigerian banks, which affected the profitability of most of them, leading to low payout, following huge provisions for loan loss, which cumulatively surpassed total net profit of the industry.
Despite the recent gallop in banking stocks, many of them remain undervalued, a situation that continues to attract local and international investors to the sector, especially, given the industry’s role in any economic growth and development. This cannot be overemphasized, given that the industry remains the engine of growth in any economy.
The table below by INVESTDATA RESEARCH shows the intrinsic value of Nigerian bank stocks and whether anyone is overvalued or underpriced.
PEG ratio > 1 implies that the stock is overvalued. It simply means that the bank’s future earnings are not going to grow much and the stock may undergo a correction in price at some point.
PEG ratio = 1 implies that the stock is fairly valued given the expected growth rate.
PEG ratio < 1 means the stock is undervalued as the market is currently underestimating its growth potential.
Negative PEG ratio: This could be the case where the current earnings of the stock are negative, or the future earnings are going to decline.