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How to Analyse the Latest Financial Result of your Stocks

How to Analyse Financial Statement of Companies In Stock Market – Learn How to Check Latest Quarterly Statements of Nigerian Companies – Profit or Loss, Balance Sheet & Cash Flow

I love Nigerian stocks that consistently beat analyst estimates, outperform NSE index without getting ahead of their fundamentals nor risking a massive sell-off. The best stocks to buy are not companies that are rising fast on the temporary news but the ones with sustainable market-beating gains, with robust and improving financial metrics that support strong price growth.

In this guide, I will be sharing practical tips (using Transcorp & Dangote Sugar stocks) to analysing your current stocks so you can quickly get a first-hand buy or sell alert before others.

Transcorp and Dangote Sugar Refinery Plc had just released there audited financial statements to the investing public, you can check it out on the official Nigerian stock exchange website right here for Transcorp and here for Dangote Sugar.

If you own stocks in either or both of these companies, you may want to quickly check whether these stocks are good to hold, or sell-off since the financials tells you how they have performed compared to a previous period. Well, I have been following the companies and can confidently say that, up till their Q3 result, they are absolutely great stocks to own.

Transcorp is not just a profitable penny stock but one of my selected turnaround stocks that are poised to do well this year. One of its subsidiaries is Transcorp Hotel, a hospitality unit that will definitely enjoy higher room booking from top politicians in the forthcoming election. Dangote Sugar was also a top performer, delivering over 200% return in 2017.

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Now that they have released their audited statement, should I continue to hold these stocks, you may ask?

Let’s take a look at what the recent results of these stocks tell us about their potential for future gains or sell-off.

What we’re looking for

  • Growth: Are profits, margins, and cash flow from operation all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

Transcorp stock

  • Growth
    • Revenue increased from N59.4bn to N80.2bn, 35% growth as a result of increased revenue from power, shop rent and capacity. Room, food and beverages and service charges declined on the back of low patronage from temporary Airport shut down.
      • In Q4, revenue grew by 34%.
    • The company recovered from N1.1bn loss to a whopping N10.6bn profit after tax, 1063% growth. Thanks to the stable exchange rate which impacted the company’s FX borrowing.
    • Profit margin increased to 13.2% from a negative territory.
  • Valuation 
    • EPS improved significantly from a loss of 2.2k to 11.7k, 631.8% increase.
    • The share price is already up by 28.4% this year, outperforming the NSE index performance of around 9%.
  • Opportunities
    • Return on shareholders’ equity is 11% compared to the negative return posted last year.
    • Debt to equity declined from 95% to 88.9%.

How to Analyse Financial Statement

Technically, Transcorp stock has been bearish for 2 months after 3 weeks really to N2.8, it’s finding support at a previous resistance region (N1.85) which is a sign that the uptrend may resume as marked by the thick yellow line.

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Dangote Sugar Refinery Stock

  • Growth
    • Despite the decline in sugar production and challenging distribution (Apapa traffic gridlock, Dangote Sugar revenue grew from N169.7bn in 2016 to N204.4bn in 2017. The increase was supported by an upward review of sugar price (50kg) to N15,000 per 50kg from N10,000.
    • In the midst of rising cost of energy and raw materials, the company was able to manage cost as the cost to sales ratio improved to 75% (86% in 2016).
    • Profit for the year rose significantly by 177% to N39.7bn (N14.3bn in 2016).
    • Profit margin also grew from 8% to 19%.
    • Net cash generated from operations fell but also solid at N25.9bn (against N39.5bn in 2016)
  • Valuation
    • EPS improved to N3.31 (N1.2 in 2016), 175%.
    • Dangote Sugar share price is up 9% this year, in line with the NSE index.
  • Opportunities
    • The return on shareholders’ equity doubled to 42% (21% in 2016).
    • Debit to equity declined from 10% to 7.1%
  • Dividend
    • Shareholders of this company will definitely enjoy a bumper harvest. The dividend payout for the year is N13.2bn compared to N6bn paid in 2016.

Despite the challenging operating environment, the company’s fundamentals are strong.

How to Analyse Financial Statement

Technically, Dangote Sugar stock has been consolidating for a while, trading between N21-N19. There is a potential breakout to the upside if the price increases to N22.

What I have shared on Transcorp and Dangote Sugar stocks are the financial metrics I quickly check when companies, I own stocks in, release their recent financial statements.

Would you like to know how I pick top performing stocks like this? check it out here

What do you think?

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