Fifteen Nigerian companies spanning banks, insurers, industrials, and real estate are currently trading below their book value, with an average P/B ratio of just 0.60.
These include Smart Products Nigeria, ETI, Access Holdings, UBA, FirstHoldCo, CI Leasing, FCMB, John Holt, UPDC REIT, Julius Berger, Zenith Bank, Regency Alliance Insurance, Aso Savings, Briclinks Africa Plc, and Linkage Assurance.
On paper, this means investors can buy their shares for less than the value of their net assets.
But does a discount always spell opportunity? For strong banks like Zenith, UBA, and Access, it may hint at undervaluation.
For struggling firms like Smart Products, Julius Berger, and Aso Savings, however, the market may simply be pricing in weakness.
The big question: are these low price-to-book ratio companies hidden bargains, or value traps in disguise?
The price-to-book ratio compares a company’s market price to its book value (net assets). A ratio below 1.0 suggests investors are paying less than the asset value, which looks like a bargain.
But in reality, such discounts can just as easily signal deeper problems, from weak profitability to overstated assets. That makes P/B both a useful metric and a potential red flag.
From the banking sector, six banks trade at an average P/B ratio of just 0.49x. Given their strong fundamentals and consistent earnings, they appear more like bargains than traps.
Over the past five years, these banks have delivered an average profit CAGR of 48%, net asset CAGR of 31%, and ROE of 26%.
Zenith Bank has been growing its profit steadily at about 35% every year (CAGR) over the past five years. Its net assets have also increased by 29%, showing that the bank is stronger financially.
The stock itself has done well, rising 33.5% this year, and analysts mostly recommend it as a BUY.
Despite this rally, it still trades at just 0.65 times its book value, meaning investors are paying only 65 kobo for every N1 of the bank’s net assets.
Outside banking, the picture is murkier. Many companies trade at discounts, but their fundamentals don’t back the low multiple.
Overall, cheap doesn’t always mean good. For Nigeria’s big banks, low valuations are an opportunity they’re delivering strong profits and growth yet still trade at a steep discount.
For most non-bank names, however, the discounts mask weak earnings and poor returns, making them more trap than treasure.
For most non-bank names, however, the discounts mask weak earnings and poor returns, making them more trap than treasure.