Like many of the stocks on the Nigerian stock exchange, ETI investors have enjoyed a good run in November 2020. The stock has provided a capital appreciation of 20.35% to its investors in November, helping it recover the losses made earlier in the year.
Ecobank Transnational Incorporated is a holding company engaged in providing banking and financial services. It has three business segments which are
ETI Price and Fair Value
With an industry median price of ₦4.81, ETI costs about 40% more than its industry group’s median price. It is perceived to be worth a little more than half of the Nigerian banks.
Upon comparing ETI’s fair value with its price, we infer that the stock trades at half of its intrinsic value, which is ₦16.96. The industry’s median fair value is ₦8.39 and even this is lower than ETI’s current market price and its fair value.
The inference that can be made from ETI’s price and fair value data, in comparison with its industry’s values, indicate that ETI is more valuable than many of its industry peers but the market still has not priced that value in properly.
ETI 1 Year Average Daily Volume
Ecobank Transnational Incorporated trades an average of 3.6 million shares daily. This is significantly less than the industry’s median volume of shares traded daily, which is approximately 10 million shares. ETI is obviously less liquid than most of the other companies in the banking industry.
ETI Market Capitalization
The median size of the “Banks” industry is ₦125.9 billion. ETI’s market capitalization, as at the close of the stock market today, Friday, November 13, 2020, was ₦168 billion – almost at par with the industry’s median.
ETI Dividend Yield
There is no record of any dividend paid by Ecobank Transnational Incorporated within the last twelve months. This will give a dividend yield of 0.00% the lowest in the industry and also, the lowest in the entire market.
The median dividend yield of the banking industry, based on all dividends paid in the last twelve months, is 4.68%. In Nigerian lingo, “at all, at all, na im…” (something is better than nothing…), therefore, any company that paid any dividend in the last twelve months will be more attractive to dividend seeking investors.
ETI Net Profit Margin
Of the 14 companies in the Nigerian banking industry, ETI has the lowest net profit margin (based on all activities in the last twelve months) with a value of 10.97%. The industry’s median value for net profit margin is 17.19% almost 2-times the value of ETI’s net profit margin.
It is not a particularly good stat to be the company with the lowest net profit margin in the industry. Some further analysis will be required of any investor looking to invest in ETI. Its financial statements should be researched to see why the net profit margin is this low compared to its industry peers.
ETI Price to Book Ratio (P/B Ratio)
Recall that a price-to-book ratio between 0 and 20 is ideal and the closer to zero, the better. With a price-to-book ratio of 0.34, we can infer that ETI could be a good value play because the book value of its assets is worth more than what the market is presently paying for them.
The banking industry’s price-to-book ratio, at the time of preparing this post, is 0.54. In comparison with its industry group, ETI compares quite well. This implies that the market is presently underpricing the value of the banking industry and ETI may benefit from a boost if the smart money decides to pay for true value.
ETI Return on Equity (ROE)
ETI has a return on equity of 11.13%. The banking industry’s median ROE is 11.20%. Once again, the return on investors’ equity (like the net profit margin) is lower than the industry’s median value.
Infographic of the key metrics for Ecobank Transnational Incorporated
Going through the data to prepare this post, I was somewhat curious. If you have been in the markets for longer than a decade, you should be familiar with ETI (well, Ecobank). The company had one of those that you just knew you had to have. Running through these numbers got me wondering, hmm…
The stats, on the face of it, are not a disaster. The price to book and price to earnings point to potentially better times ahead. The liquidity (average number of shares traded daily) is where you start to have questions and then when you get to the profitability and returns, you start to think “hmm, maybe that is why the trading volumes are so low; investors are not attracted because of the lowe returns and poor dividends”.
As disclaimed, this post is not investment advice. However, if you are looking to ETI and get worried after reading this, please, don’t get worried. This is just to point you to where you need to pay more attention. In this case, you want to know why ETI’s returns and profitability are this low.
Taiwo Megbope is the Co-founder and Chief Growth Officer at Investor Hangout.
He is tasked with ensuring and managing the growth of the Investor Hangout project. His responsibilities include creating and implementing the project's vision as well as executing growth-generating strategies.
Taiwo is an avid researcher and autodidact. In his spare time, he enjoys spending time with his family and friends.