Fifteen Nigerian companies across banking, insurance, industrials, and real estate are currently trading below their book value, with an average price-to-book (P/B) ratio of just 0.60. This means investors can technically buy shares for less than the value of their net assets. The list includes well-known names such as Zenith Bank, Access Holdings, UBA, ETI, and FirstHoldco, alongside firms like Julius Berger, UPDC REIT, Smart Products Nigeria, and Aso Savings.
The low P/B ratio raises the critical question: do these stocks represent undervalued opportunities, or are they classic “value traps” that signal weak fundamentals? Analysts note that while strong banks like Zenith and UBA appear undervalued despite robust earnings growth, weaker companies such as Aso Savings and Julius Berger may be trading cheap because of persistent operational struggles.
In the banking sector, six lenders trade at an average P/B of just 0.49x. Over the past five years, these banks have delivered consistent profit growth, averaging 48% compound annual growth rate (CAGR), alongside net asset growth of 31% and return on equity of 26%. Zenith Bank, for example, has grown profits at 35% annually and gained 33.5% year-to-date, yet still trades at only 0.65x book value. UBA, Access Holdings, FCMB, ETI, and FirstHoldco show similar trends, leading analysts to recommend them as solid bargains.
Outside of banking, however, the story is less encouraging. Several companies trade at steep discounts, but their fundamentals remain weak. Smart Products Nigeria has gained 260% in share price this year, yet its profits have barely moved in five years, making it a speculative play. Julius Berger shows asset growth but shrinking profits, while insurers like Regency Alliance and Linkage Assurance look overheated with weak profitability. Aso Savings, with almost no meaningful earnings, stands out as a clear trap despite its discounted valuation.
The overall picture suggests that Nigeria’s big banks offer genuine undervaluation opportunities, backed by strong earnings and growth. By contrast, most non-bank firms trading below book value may simply reflect weak fundamentals rather than untapped potential. For investors, the key lies in separating true bargains from traps—focusing on companies delivering consistent profitability rather than relying solely on low P/B multiples.
Source: Nairametrics