- How consistent are the earnings in five years?
- PEG Ratio Analysis
The Third Quarter of the year in a matter of days will soon be over, and in a matter of weeks, Q3 2022 results of quoted firms will start hitting the market. As the market anticipates the Q3 results of these companies, smart investors are already taking position against their expectations.
It is worthy to note that expectation is the mother of all investment strategies. Investment in stocks is done against expectation and not on realities. In other words, you are buying into a company based on what you think you can get; that is expectation.
We deem it necessary to do earnings forecast for banking stocks ahead the release of their Q3 earnings for 2022.
Our projections of Q3 earnings for banks is based on their PEG ratios. PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings per share (EPS), and the company’s expected growth. In other words, it is not enough for anyone to invest on just the strength of a company’s previous or latest earnings but these in addition to the expected earnings.
ACCESS HOLDINGS
Earnings history of Access Bank Plc for Q1, Q2 and Q3 for the past 5 years show that the bank has been consistent in improving on its earnings per share year on year.
Consistent growth is observed in the bank’s results within a financial year, Q1 to Q3. In other words, there was not a lower performance in a current quarter than the preceding quarter within a financial year.
Q3 earnings per share (EPS) of the Access Bank over the last 5 years has a Geometric Average Growth rate of 21.19%.
Relative to the current share price of N8.80 and Q3’21 earnings per share of N3.43, P.E ratio is estimated at 2.57x.
PEG ratio against the expected Q3 2022 earnings is 0.12 and it implies that the share price of Access Holdings at current price is underpriced.
Q3 2022 Earnings per share of about N4.16 is projected for Access Holdings Plc.
FIRST BANK OF NIGERIA HOLDINGS (FBNH)
In Q3 2021, the Earnings per share of FBNH dropped to N1.14 from the EPS of N1.90 achieved in Q3 2020.
However, in Q4 2021, the big elephant surprised the market with significant growth in its earnings, year on year.
Since that time till now, FBNH has not looked backwards as its Q1 2022 and Q2 2022 earnings were impressive with significant growth in topline and bottom line figures.
Q3 earnings per share (EPS) of FBNH over the last 5 years has a geometric average growth rate of 11.04%.
At the share price of N10.15 and Q3’21 earnings per share of N1.14, P.E ratio of the bank is calculated as 8.90x.
PEG ratio against the expected Q3 earnings is 0.81, being less than 1 implies that the share price of FBNH is underpriced.
Based on its impressive outings in Q1 and Q2 2022, the EPS of N1.75 is projected for FBNH against its Q3 2022 earnings release.
ZENITH BANK
Zenith Bank has performed over the years with consistent growth in turnover, profit after tax and earnings per share especially with good dividend pay-out record.
Earnings history of the Bank for Q1, Q2 and Q3 for the past 5 years show that the bank has been consistent in improving on its earnings per share year on year.
Q3 earnings per share (EPS) of the bank over the last 5 years has a geometric average growth rate of 5.58%.
At the current share price of N19.95 and Q3’21 earnings per share of N5.12, P.E ratio is calculated as 3.9x.
PEG ratio against the expected Q3 earnings is 0.70, which makes the share price of Zenith Bank underpriced at current price.
Q3 2022 earnings per share of N5.41 is projected for Zenith Bank.
GUARANTY TRUST HOLDINGS
Since 2020, there have been consistent drop in the earnings of GTCO including Q1, Q2 and Q3 respectively.
Earnings growth rate of Guaranty Trust in the last 5 years is 3.04%
At the current share price of N18.50 and Q3’21 earnings per share of N4.40, P.E ratio is calculated as 4.20x.
PEG ratio against the expected Q3 earnings is 1.38.
Q3 2022 earnings per share of N4.53 is projected for GTCO.
UNITED BANK FOR AFRICA
Q3 earnings per share of UBA over the last 5 years has a geometric average growth rate of 14.51%.
Relative to the current share price of N7.30 and Q3’21 earnings per share of N3.06, the P.E ratio of the Bank is evaluated as 2.39x.
PEG ratio against the expected Q3 earnings is 0.16, being less than 1 makes the share price of UBA underpriced at current price.
Q3 2022 earnings per share of about N3.50 is projected for UBA.
WEMA BANK
The recent share reconstruction in Wema Bank significantly boosted its earnings by over 600%.
Prior to share reconstruction the earnings per share of the bank ranged between 2 kobo and 16 kobo for Q1, Q2 and Q3 in the past 5 years.
Upon the competition of its share reconstruction, Q1 2022 EPS grew to 22 kobo from 3 kobo achieved in Q1 2021. The Q2 2022 earnings of the bank also grew significantly.
Earnings growth rate of Wema Bank over the last 5 years stands at 41.42%.
Relative to the current share price of N3.46 and Q3’21 earnings per share of N0.16, P.E ratio of the bank is calculated as 21.63x.
PEG ratio against the expected Q3 earnings is 0.52.
Q3 2022 earnings per share of Wema Bank is projected to be in the region of N0.58.
ECOBANK
Q3 Earnings history of Ecobank Transnational Incorporated over the last 5 years has a growth rate of 14.65%.
At the current share price of N11.05 and Q3’21 earnings per share of N4.25, P.E ratio of Ecobank is calculated as 2.60x.
PEG ratio against the expected Q3 earnings is 0.18.
Q3 2022 earnings per share of about N4.87 is projected for Ecobank.
FIDELITY BANK
Q3 earnings per share of Fidelity Bank over the last 5 years has geometric average growth rate of 16.47%.
At the current share price of N3.78 and Q3’21 earnings per share of N0.92, P.E ratio of Fidelity Bank is calculated as 4.11x.
PEG ratio against the expected Q3 earnings is 0.25 and this implies that Fidelity Bank is underpriced.
Q3 2022 earnings per share of N1.07 is projected for Fidelity Bank.
STANBIC IBTC
Q3 earnings per share of Stanbic IBTC over the last 5 years has geometric average growth rate of 1.43%.
At the current share price of N29 and Q3’21 earnings per share of N3.08, P.E ratio of Stanbic IBTC is calculated as 9.42x.
PEG ratio against the expected Q3 earnings 6.59.
Q3 2022 earnings per share of N3.12 is projected for Stanbic IBTC.
FCMB
Q3 earnings per share of FCMB over the last 5 years has geometric average growth rate of 25.74%.
At the current share price of N3.24 and Q3’21 earnings per share of N0.70, P.E ratio of the Group is calculated as 4.63x.
PEG ratio against the expected Q3 earnings is 0.18.
Q3 2022 earnings per share of N0.88 is projected for FCMB.
STERLING BANK
Q3 earnings per share of Sterling Bank over the last 5 years has geometric average growth rate of 11.96%.
At the current share price of N1.49 and Q3’21 earnings per share of N0.33, P.E ratio of Sterling Bank is calculated as 4.52x.
PEG ratio against the expected Q3 earnings 0.38.
Q3 2022 earnings per share of N0.37 is projected for Sterling Bank.
UNION BANK
Q3 earnings per share of Union Bank over the last 5 years has geometric average growth rate of 1.70%.
At the current share price of N5.75 and Q3’21 earnings per share of N0.46, P.E ratio of Union Bank is calculated as 12.50x.
PEG ratio against the expected Q3 earnings is 7.35.
Q3 2022 earnings per share of N0.47 is projected for Union Bank.
UNITY BANK
Q3 earnings per share of Unity Bank over the last 5 years has a growth rate of 35.79%.
At the current share price of N0.44 and Q3’21 earnings per share of N0.17, P.E ratio of Unity Bank is calculated as 2.59x.
PEG ratio against the expected Q3 earnings 0.07.
Q3 2022 earnings per share of N0.23 is projected for Unity Bank.
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