While overall stock market performance over the last five years has been mostly flattish, a group of 15 publicly listed companies have been able to deliver cumulative stock return of more than 300 percent between July 2013 and July 2018. Thus, outperforming the market benchmark by large margins and enriching shareholders.
The best 5 performing stocks over the last five years were MRS Nigeria (1642 percent), Beta Glass (842 percent), NEM insurance (802 percent), C&I Leasing (534 percent) and Custodian and Allied Insurance (532 percent) based on cumulative returns according to data compiled from Bloomberg.
The rapid growth in share price for some of these stocks can easily be traced to their impressive earnings growth during the same period. NEM insurance which was the third best performing stock in the Nigerian equity market was also the third best performing company in terms of earnings growth among publicly listed companies in Nigeria.
But not all companies which have grown profits astronomically over the last five years have seen their share prices soar high enough to earn them a spot in the top 15 stock performers.
Out of the top 15 companies by earnings growth on the Nigerian Stock Exchange between 2013 and 2017, only 8 featured among the 15 best performing stocks between 2013 till July 3rd 2018.
The 8 companies who made both list are Presco, Okomu Oil, C&I Leasing, Fidson Healthcare, NEM Insurance, Eterna, Dangote Sugar and Beta Glass. The average price to earnings (PE) ratio of these companies is 6.17 which shows that the stocks may still be relatively cheap and may continue that impressive share price growth if earnings continue to swell.
Some of the rapidly growing companies have gone noticed by most investors, as such these companies have not seen valuation catch up to their profit performance, thus providing an opportunity for bargain hunters to swoop into these companies.
For other companies like MRS Nigeria which was the best performing stock between 2013 and H1 2018, the company barely made it into the top 25 companies by earnings growth over the same period, which shows that predicting future performance of any stock cannot be entirely based on earnings.
