First Bank, UBA, GTCO, Access HoldCo, and Zenith Bank, collectively known as FUGAZ, continue to garner favourable attention from analysts.
According to the NGX compendium of broker stock recommendations for the week of August 27th-30th, 2024, the FUGAZ banks have received notable ratings from three brokerage houses; Bancorp Securities, Afrinvest, and Meristem.
Analysts’ stock recommendations offer valuable guidance to investors by providing expert assessments of publicly traded companies and their stock potential.
These recommendations generally fall into three main categories: BUY, HOLD, and SELL, each suggesting a different strategy for managing investments.
- BUY: Analysts believe the stock will appreciate significantly, recommending it for purchase due to its strong growth potential and positive outlook.
- HOLD: Suggests maintaining current holdings, with the stock expected to remain stable or offer moderate returns.
- SELL: Indicates that the stock may decline in value, advising investors to divest to avoid losses.
- ACCUMULATE: Recommends gradually increasing holdings over time, reflecting confidence in long-term growth despite modest immediate expectations.
These ratings consider various factors, including the share price movement, stocks’ intrinsic or fair value, positive earnings outlook, overall positive trend in the banking sector, consistent dividend income, and other relevant considerations.
In 2023, the FUGAZ stocks achieved an impressive average year-to-date (YtD) share price gain of 133%. The year began strongly with a Q1 YtD average gain of 22%.
However, in Q2, the stocks experienced an average decline of 22% YtD. As of the market close on August 28, 2024, the stocks have seen a partial recovery but still show a reduced YtD decline of 4.3%, reflecting a bearish trend.
However, examining the dividend yield reveals a different perspective. The banks offered an average dividend yield of 8.5%, which impacted on the average total return, bringing it to 4.2% YtD.
Additionally, their average trailing-twelve-month price-to-earnings (P/E) ratio stood at 1.3x. These factors likely played a key role in shaping the analysts’ ratings.
The high dividend yield makes the stocks attractive to income-focused investors. It reflects the banks’ ability to provide substantial income relative to their stock price, which is appealing amidst price fluctuations.
Similarly, the low P/E ratio suggests that the stocks are trading at a low multiple of their earnings, indicating potential undervaluation. This can be an attraction to investors looking for valuable opportunities.
Incorporating these metrics, analysts may view the stocks as offering strong income potential and value, which could influence their overall recommendations despite recent market volatility and capital-raising activities.
FBNH and UBA: Strong “BUY” Recommendations
FBNH received a consensus “BUY” recommendation from all three houses. The bank’s price-to-earnings (P/E) ratio of 1.68x, though higher than the group’s average of 1.31x, suggests that analysts believe in its strong earnings growth potential.
Despite offering a relatively low dividend yield of 1.78%, well below the group average of 8.51%, the bank’s valuation still presents upside potential, highlighting its appeal for capital appreciation.
UBA stands out with a particularly attractive valuation, boasting a trailing twelve-month (TTM) P/E ratio of 1.13x, lower than the average P/E ratio among the FUGAZ stocks.
Additionally, UBA offers the highest dividend yield at 12.44%. Despite a year-to-date (YtD) share price decline of 12.28%, the total return is positive at 0.6%, supported by its strong dividend yield.
These factors likely informed the consensus “BUY” recommendation from analysts, emphasizing UBA’s potential for continued growth and income generation.
AccessCorp: A Balanced View with Strong Upside Potential
Access Holdings (AccessCorp) received 2 “BUY” recommendations and 1 “HOLD” recommendation, reflecting a generally positive outlook with some caution.
The bank’s trailing twelve-month P/E ratio of 0.97x is the lowest among the FUGAZ banks, making it an attractive option for value-oriented investors.
Coupled with a high dividend yield of 11.1%, AccessCorp appears appealing despite a 17.9% YtD share price decline, which results in a total YtD loss of 6.87%.
Analysts have set a 12-month price target of N30.33 for AccessCorp, indicating over 60% upside potential from its current levels, which highlights their confidence in its ability to deliver strong returns.
Zenith Bank: A Steady Performer with Balanced Recommendations
Zenith Bank attracted 1 “BUY,” 1 “HOLD,” and 1 “ACCUMULATE” recommendation, indicating a balanced view of its prospects.
Trading at a P/E ratio of 1.39x, slightly above the group’s average, and offering a dividend yield of 10.50%, Zenith Bank appears an attractive choice for income-focused investors.
The stock has shown resilience, with only a 0.65% YtD decline, a significant recovery from the 20% YtD decline in Q2, resulting in a total YtD return of 9.7%.
This recovery likely supports the positive recommendations, with analysts possibly anticipating further gains as market conditions improve.
GTCO: Leading in Returns but with a Cautious Outlook
GTCO garnered 1 “BUY” and 2 “HOLD” recommendations. Analysts have set a price target of N56.83, suggesting a potential upside of 24.08%.
GTCO leads the group with the best YtD share price return of 13%. When combined with a dividend yield of 6.99%, the total return reaches 20% YtD, making it the top performer in the group.
The bank’s earnings multiple of 1.38x is slightly above the group average, reflecting a moderate valuation.
GTCO’s stock beta of 0.84 indicates lower volatility compared to the broader market, suggesting a more stable investment, which may appeal to risk-averse investors.
The combination of strong returns, a moderate P/E ratio, and a relatively low beta aligns well with the “HOLD” recommendations, as analysts may view GTCO as a solid, less risky option for investors, with potential for steady growth rather than aggressive gains.
Overall, these banks, despite variations in P/E ratios and dividend yields, each offer unique strengths that cater to various investor preferences. The positive ratings they receive highlight their promising potential.
However, it’s important to remember that these ratings are dynamic and may change as new information comes to light. Analysts continually reassess their recommendations to reflect evolving market conditions and company developments.
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