Zenith Bank Leads NGSE In High Margin Of Safety, Upside Potential For Investment Goal

The coronavirus global pandemic has virtually killed many stock markets and devastated economies of the world, whether developed or developing.
This covid-19 driven bear market has provided investing and trading opportunities for intelligent investors.
Value investing is as old at the stock market, just as the margin of safety in equity investment helps investors to buy value, while at the same time protecting themselves from their poor judgment and market downturns, a situation when the intrinsic value stock is higher than market price. This is the tenets of value investing, of which capital preservation is the first rule, suggesting that investors should look out for companies with low Price-Earnings and Price-Book ratios.

Here, investors should analyze a company’s financial statement and the accompanying footnotes and identify if there are hidden values or assets with potentials that are unknown to the market, and which when noticed will attract attention.
The simple interpretation of ‘Margin of Safety’ is buying a stock selling at a discounted price, or below its book or intrinsic value. Every investor wants to buy cheap stocks with value and potential to appreciate, or in more practical terms- paying kobo for a Naira value. Traders want to buy low and sell high by speculating, which is part and parcel of every stock market at any given time.
Look at the table above. An analysis of the 10 most capitalized stocks on the Nigerian Stock Exchange reveals the undervalued state of these companies at this time and the fact that they are selling at a discount. They are also backed by strong fundamentals and good prospects, knowing that the present economic situation will not last for too long.

From the above table, Zenith Bank appears to be the cheapest stock, as it offers the highest margin of safety, from its Price to Book ratio of 0.39x and Price to Earnings ratio of 1.78x, which shows that it is that stock with the shortest time within which investors can recoup their investment. This bank is the market’s most profitable, has the largest shareholders’ funds, and recorded the Highest Dividend Yield in the market at 23.62%, while Earnings Yield stood at 56.13% as at close of trading on Friday, March 20, 2020.
Other equities selling at a huge discount to the market price on the table are Seplat Petroleum Development Company and Guaranty Trust Bank with Price to Book positions of 0.59x and 0.79x respectively.
See the above table for more details.

Definitions: D/Yield =Dividend Yield; E/Yield =Earnings Yield; BV= Book Value; P/Book=Price to book; ROE = Return on Equity

https://investdata.com.ng/2020/04/zenith-bank-leads-ngse-in-high-margin-of-safety-upside-potential-for-investment-goal/