Investors Pay Extra For Future Earnings Power of 26 NGX Firms

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Most healthy Nigeria Exchange (NGX) listed companies trade at a share price well above their net working capital per share (NWCPS) as investors are optimistic about their ability to manage their short-term assets and liabilities.

Data gathered by MoneyCentral shows twenty-six out of thirty-seven listed firms’ share price exceeds net working capital because investors pay extra for their future earnings power.

Price to net working capital is a financial metric that compares a company’s closing stock price to its net working capital per share. Net working capital is calculated as the difference between total current assets and total current liabilities, representing the short-term liquidity available to a company to meet its operational needs. This ratio provides insight into how much investors are willing to pay for each unit of net working capital, reflecting the company’s operational efficiency and liquidity position.

A higher ratio gives investors the confidence that the company has sufficient liquidity to meet obligations to suppliers and run its operation on a daily basis without relying on capital injection or borrowing.

Seplat Energy Plc share price closed at N11, 363.90 on August 14 in Lagos, which compares with net working capital per share of N148.37, according to MoneyCentral calculations.

Transnational Corporation of Nigeria (Transcorp) Plc, (Share price: N37 vs. NWCPS: N15.13). Julius Berger Plc, (Share price: N310.80 vs. NWCPS:  N233.58); BUA Foods, (Share price: N310.80 vs. NWCPS:  N233.58); International Breweries, (Share price: N10.50 vs. NWCPS:  N0.89); Nascon Allied Industries, (Share price: N195 vs. NWCPS:  N17.75); Unilever Nigeria, (Share price: N118.30 vs. NWCPS: N13.67); Fidson Healthcare, (Share price: N93.55 vs. NWCPS: N9.78), and BUA Cement, (Share price: N316…