Analysts say the firms share price rise was not necessarily driven by company fundamentals or specific business benefiting news.
Within the first seven days of its arrival as a quoted company on the Nigerian Exchange in
On its sixth day of trade (
Interestingly, the Nigerian stock market, which has appreciated by 4.07 per cent since the turn of the year, has hung to the string of gains by
That means the stock index might have to look elsewhere for another catalyst to drive gain in the near term should the share price of the debutant food company continue to stagnate or market correction happens.
In December, the firm, which produces flour, pasta, sugar, rice and edible oil executed a consolidation of its five business units into a single entity ahead of its listing.
The steep rise in
Within a year, the share price of
"Based on the listing price and the information on the memorandum, the implied price-to-earnings (PE) ratio is over 40 which is significantly higher than the P/E ratio of comparable players in the sector," Timchang Gwatau, research associate at brokerage and investment bank
Analysts use PE ratio to know if a company's stock is overvalued, meaning trading above its real value, or undervalued, meaning trading below its intrinsic value. A high PE ratio indicates the stock is overvalued while a low PE ratio implies it is undervalued.
The PE ratio of
Traders, according to Mr Gwatau, said the sentiment on the stock since it listed is not quite reflective of the market.
"How can it be when the market barely knows anything about the company?" he quoted one as saying.
"Some of the companies' products are not yet launched. The ones that have been launched are not popular."
According to an analyst that asked not to be named because of the sensitive nature of the subject, whatever is driving the price is not likely to be market sentiment because the price is not fundamentally justifiable and is probably artificially driven by promoters.
The company is holding an analyst/investor's call this week, where the management has got some explaining to do about the state of things.
"The rally in
"Clearly, the rally was not necessarily driven by company fundamentals or specific business benefiting news."
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