The Financial Metrics to Check Before You Buy Any Nigerian Stock ?

You are correct — RED and GREEN are not for investors, they are for gamblers.

Green means price went up TODAY. Red means it went down TODAY. That color does not tell you if Dangote Cement is making profit or dying. To know that, you must check the ingredients inside the company.

Think of a stock like buying a Keke. You won’t buy just because it’s painted green today. You will check engine, mileage, fuel consumption. Same for stocks.

Here are the 6 Yardsticks and How to Judge Them in Nigeria:

1. EPS – Earnings Per Share (The Engine)
– What it is: Profit the company made divided by number of shares.
– Formula:`EPS = Total Profit / Total Shares`
– How to judge:EPS must be positive and growing. If GTCO EPS was ₦5 in 2023, ₦7 in 2024, ₦9 in 2025 — good, engine is strong. If EPS is negative — run.
– Nigerian Standard: For banks, EPS above ₦3 is okay. For industrial, above ₦5.

2. P/E Ratio – Price to Earnings (Is it Expensive ?)
– What it is: How many years of profit you are paying to buy the share.
– Formula: `P/E = Share Price / EPS`
– How to judge:Lower P/E = Cheaper. Higher P/E = Expensive.
– Nigerian Standard: NGX average P/E is 8 to 15. If P/E is 7, it’s cheap. If P/E is 35, it’s very expensive — unless it’s a fast grower like MTN or Airtel. Avoid anything above 25 if you are a beginner.

3. ROE – Return on Equity (How Smart is Management ?)
– What it is: For every ₦100 of shareholders’ money, how much profit management creates.
– Formula:`ROE = Profit / Shareholders Fund x 100%`
– How to judge:Higher is better. It shows management is not wasting your money.
– Nigerian Standard: Look for ROE above 15%. GTCO, Zenith, Dangote Cement, BUA Foods usually do 20-30%. If ROE is below 8%, management is lazy.

4. Debt-to-Equity (D/E) – How Much Loan ?
– What it is: How much the company borrowed vs what it owns.
– How to judge: With Nigerian interest rate at 26-30% now, debt is dangerous. A company with high debt will pay all profit to bank.
– Nigerian Standard: For non-banks (Dangote, BUA, Nestle), D/E must be below 1.0. If D/E is 2.5, they borrowed ₦2.50 for every ₦1 they have — too risky.

5. Dividend Yield (Your Yearly Rent)
– What it is: Cash the company pays you yearly for holding.
– Formula: `Yield = Dividend per share / Share Price x 100`
– How to judge: It must be consistent for 3 years.
– Nigerian Standard: Good yield is 4% – 10%. If yield is 15%+, check if it’s a trap — they may not pay next year.

6. Revenue Growth & Profit Margin (Is it Growing or Dying ?)
– What it is: Is the company selling more every year ?
– How to judge: Open 3 years financials. Revenue should go up. Profit Margin `(Profit / Revenue)` should not be dropping. If revenue is up but margin fell from 20% to 4%, cost is killing them.

How to test with general market effect:
Compare the company to its sector average. Don’t compare GTBank with Dangote Cement.
– For Banks: Compare GTCO ROE with Zenith, Access ROE. Who is better ?
– For Cement: Compare Dangote vs BUA vs Lafarge.
If your stock has lower P/E and higher ROE than its competitors, it’s the best in that sector.

Where do you get these measuring instruments? Not from Google rumors.

You get them from 3 official places — FREE:

1. NGX Website (Most Reliable): http://ngxgroup.com > Company Financials. You will see quarterly reports.
2. The App Itself: In Bamboo/Chaka/Trove, click any stock > Financials / Key Statistics. EPS, P/E, Dividend are already calculated.
3. Company Website: e.g., http://dangotecement.com > Investors and Financial Reports. Download PDF.

My 1-Minute Decision Personal Formula for ₦1M investor:

Before I buy, I score like this:

> Is EPS positive and growing? YES = 1 point
> Is P/E Is ROE > 15%? YES = 1 point
> Is D/E Has it paid dividend 3 years straight? YES = 1 point

If I get 4/5 or 5/5 — I BUY. If I get 2/5 — I LEAVE, even if it’s top gainer and green today.