Ah, my dear, let's talk about share prices in the Nigerian Stock Exchange.Simple Explanation:When we say a share is overpriced, it means the current price is higher than what the company's value suggests. On the other hand, if a share is underpriced, it means the current price is lower than the compRead more
Ah, my dear, let’s talk about share prices in the Nigerian Stock Exchange.
Simple Explanation:
When we say a share is overpriced, it means the current price is higher than what the company’s value suggests. On the other hand, if a share is underpriced, it means the current price is lower than the company’s value.
How it works:
For NGXGROUP, if the current price is 25 naira per share, we need to look at the company’s financial health, future prospects, and compare it to other similar companies in the same industry to determine if it is overpriced or underpriced.
Benefits:
– If the share is overpriced, it might be a good time to sell and lock in profits.
– If it’s underpriced, it could be a good opportunity to buy and make a profit when the price goes up.
Risks:
– If you buy an overpriced share, you might lose money if the price drops.
– If you sell an underpriced share, you might miss out on potential profits if the price goes up.
Real-life Nigerian Example:
Imagine buying tomatoes from a supplier. If the supplier suddenly raises the price even though the tomatoes are not fresh, that’s like an overpriced share. But if the supplier offers a discount on fresh, quality tomatoes, that’s like an underpriced share.
Common Mistakes:
– People sometimes ignore the company’s financial health and follow the crowd, buying overpriced shares.
– Others might miss out on great opportunities by being afraid to buy underpriced shares.
Practical Steps to Get Started:
1. Research NGXGROUP’s financial reports and news.
2. Compare its performance with other companies in the same industry. 3. Consult with a financial advisor if needed.
Short Summary:
At 25 naira per share, whether NGXGROUP is overpriced or underpriced depends on its actual value compared to the current price. Do your research and make informed decisions.
Now, let me ask you: Have you ever bought shares in a company before? If so, what was your experience like?
Yes. This is one of the most misunderstood concepts in investing, especially in Nigeria because many investors see things like: “50 kobo nominal value” “₦1 ordinary share” “market price ₦48” and assume they are directly related. They are actually very different things. 1. Nominal Value (Par Value /Read more
Yes. This is one of the most misunderstood concepts in investing, especially in Nigeria because many investors see things like:
“50 kobo nominal value”
“₦1 ordinary share”
“market price ₦48”
and assume they are directly related.
They are actually very different things.
1. Nominal Value (Par Value / Face Value)
Nominal value is the original legal value assigned to a share when the company created it.
Think of it as:
the “birth certificate value” of the share.
It is mostly:
an accounting/legal concept,
used in company formation and share capital structure.
Example:
A company may say:
Authorized shares: 10 billion shares
Nominal value: ₦1 each
This means the legal share capital is:
The nominal value does NOT tell you:
whether the company is profitable,
whether investors like it,
whether the stock is expensive or cheap.
Example Using Nigerian Stocks
Suppose:
Zenith Bank Plc has a nominal value of ₦0.50,
but the stock trades in the market at ₦48.
That ₦0.50 is just the legal face value.
Investors are willing to pay ₦48 because of:
profits,
dividends,
growth,
trust,
future expectations.
2. Market Value (Market Price)
This is the actual current price investors are willing to buy or sell the share for on the exchange.
This is what you see daily on:
brokerage apps,
NGX market reports,
CNBC/Bloomberg.
It changes every day based on:
demand and supply,
company earnings,
dividend expectations,
economic conditions,
investor sentiment.
Simple Village Market Analogy
Imagine Mama Ngozi sells tomatoes.
Nominal Value:
The original cost price of the basket years ago:
maybe ₦500.
Market Value:
What buyers are willing to pay today:
maybe ₦15,000 because tomatoes are scarce.
The market does not care much about the original cost anymore.
Same with shares.
Why Market Value Matters More to Investors
Because market value determines:
your profit/loss,
company valuation,
investor wealth,
market capitalization.
If you bought:
Zenith at ₦35,
and market price rises to ₦48,
your investment gained value.
The nominal value stayed ₦0.50 the whole time.
How It Affects Companies
A. Nominal Value Affects:
Mostly:
legal share capital,
accounting records,
regulatory structure.
It rarely affects everyday investing decisions.
B. Market Value Affects:
Very important things like:
company valuation,
investor confidence,
ability to raise capital,
attractiveness to institutional investors.
Market Capitalization
This is where market value becomes powerful.
Formula:
For example:
If:
a company has 40 billion shares,
market price is ₦50,
then:
That becomes the company’s approximate market valuation.
Important Insight
A company can have:
very low nominal value,
but huge market value.
Example globally:
Apple Inc.
Microsoft Corporation
Their nominal values are tiny compared to their market valuations.
Why?
Because investors value:
earnings,
data,
dominance,
future cash flow,
innovation.
Not face value.
Does Low Nominal Value Mean Cheap Stock?
No.
This is a common beginner mistake.
A ₦1 nominal value stock trading at ₦100 may still be cheaper fundamentally than:
another ₦1 nominal value stock trading at ₦10.
Because valuation depends on:
profits,
debt,
growth,
cash flow,
dividend quality,
management quality.
Not nominal value.
Bonus Concept: Premium
If a company issues shares above nominal value:
Example:
nominal value = ₦1,
issued to investors at ₦20,
then:
₦1 goes to share capital,
₦19 becomes share premium.
That premium strengthens the company’s equity base.
The Main Thing to Remember
Nominal Value
= legal/accounting face value.
Market Value
= what investors believe the company is worth right now.
And in investing, market value is usually the one that matters most.
This is a very good question, and many beginners get confused by it. The key thing to understand is this: share price and market capitalization are not the same thing. Share price is the price of one unit of a company’s stock. Market capitalization is the total value of the company, calculated as shRead more
This is a very good question, and many beginners get confused by it.
The key thing to understand is this: share price and market capitalization are not the same thing.
Share price is the price of one unit of a company’s stock.
Market capitalization is the total value of the company, calculated as share price multiplied by the total number of shares.
So a company can have a lower share price but still be bigger in total value if it has more shares outstanding.
Using MTN Nigeria and Airtel Africa as an example, Airtel has fewer shares in the market compared to MTN. Because of this, each Airtel share carries a higher price, while MTN has more shares, which spreads its total value across more units, making the price per share lower.
Share price alone does not tell you how big or valuable a company is. What really matters is the total market capitalization, not just the price of one share.
So when comparing stocks, do not judge by price alone. Always consider the overall size of the company, its business strength, earnings, and long term performance.
Is NGXGROUP Overpriced or Underpriced at ₦25 Per Share?
Ah, my dear, let's talk about share prices in the Nigerian Stock Exchange.Simple Explanation:When we say a share is overpriced, it means the current price is higher than what the company's value suggests. On the other hand, if a share is underpriced, it means the current price is lower than the compRead more
Ah, my dear, let’s talk about share prices in the Nigerian Stock Exchange.
Simple Explanation:
When we say a share is overpriced, it means the current price is higher than what the company’s value suggests. On the other hand, if a share is underpriced, it means the current price is lower than the company’s value.
How it works:
For NGXGROUP, if the current price is 25 naira per share, we need to look at the company’s financial health, future prospects, and compare it to other similar companies in the same industry to determine if it is overpriced or underpriced.
Benefits:
– If the share is overpriced, it might be a good time to sell and lock in profits.
– If it’s underpriced, it could be a good opportunity to buy and make a profit when the price goes up.
Risks:
– If you buy an overpriced share, you might lose money if the price drops.
– If you sell an underpriced share, you might miss out on potential profits if the price goes up.
Real-life Nigerian Example:
Imagine buying tomatoes from a supplier. If the supplier suddenly raises the price even though the tomatoes are not fresh, that’s like an overpriced share. But if the supplier offers a discount on fresh, quality tomatoes, that’s like an underpriced share.
Common Mistakes:
– People sometimes ignore the company’s financial health and follow the crowd, buying overpriced shares.
– Others might miss out on great opportunities by being afraid to buy underpriced shares.
Practical Steps to Get Started:
1. Research NGXGROUP’s financial reports and news.
2. Compare its performance with other companies in the same industry.
3. Consult with a financial advisor if needed.
Short Summary:
At 25 naira per share, whether NGXGROUP is overpriced or underpriced depends on its actual value compared to the current price. Do your research and make informed decisions.
Now, let me ask you: Have you ever bought shares in a company before? If so, what was your experience like?
See lessWhat Is the Difference Between Nominal Value and Market Value of Shares?
Yes. This is one of the most misunderstood concepts in investing, especially in Nigeria because many investors see things like: “50 kobo nominal value” “₦1 ordinary share” “market price ₦48” and assume they are directly related. They are actually very different things. 1. Nominal Value (Par Value /Read more
Yes. This is one of the most misunderstood concepts in investing, especially in Nigeria because many investors see things like:
See less“50 kobo nominal value”
“₦1 ordinary share”
“market price ₦48”
and assume they are directly related.
They are actually very different things.
1. Nominal Value (Par Value / Face Value)
Nominal value is the original legal value assigned to a share when the company created it.
Think of it as:
the “birth certificate value” of the share.
It is mostly:
an accounting/legal concept,
used in company formation and share capital structure.
Example:
A company may say:
Authorized shares: 10 billion shares
Nominal value: ₦1 each
This means the legal share capital is:
The nominal value does NOT tell you:
whether the company is profitable,
whether investors like it,
whether the stock is expensive or cheap.
Example Using Nigerian Stocks
Suppose:
Zenith Bank Plc has a nominal value of ₦0.50,
but the stock trades in the market at ₦48.
That ₦0.50 is just the legal face value.
Investors are willing to pay ₦48 because of:
profits,
dividends,
growth,
trust,
future expectations.
2. Market Value (Market Price)
This is the actual current price investors are willing to buy or sell the share for on the exchange.
This is what you see daily on:
brokerage apps,
NGX market reports,
CNBC/Bloomberg.
It changes every day based on:
demand and supply,
company earnings,
dividend expectations,
economic conditions,
investor sentiment.
Simple Village Market Analogy
Imagine Mama Ngozi sells tomatoes.
Nominal Value:
The original cost price of the basket years ago:
maybe ₦500.
Market Value:
What buyers are willing to pay today:
maybe ₦15,000 because tomatoes are scarce.
The market does not care much about the original cost anymore.
Same with shares.
Why Market Value Matters More to Investors
Because market value determines:
your profit/loss,
company valuation,
investor wealth,
market capitalization.
If you bought:
Zenith at ₦35,
and market price rises to ₦48,
your investment gained value.
The nominal value stayed ₦0.50 the whole time.
How It Affects Companies
A. Nominal Value Affects:
Mostly:
legal share capital,
accounting records,
regulatory structure.
It rarely affects everyday investing decisions.
B. Market Value Affects:
Very important things like:
company valuation,
investor confidence,
ability to raise capital,
attractiveness to institutional investors.
Market Capitalization
This is where market value becomes powerful.
Formula:
For example:
If:
a company has 40 billion shares,
market price is ₦50,
then:
That becomes the company’s approximate market valuation.
Important Insight
A company can have:
very low nominal value,
but huge market value.
Example globally:
Apple Inc.
Microsoft Corporation
Their nominal values are tiny compared to their market valuations.
Why?
Because investors value:
earnings,
data,
dominance,
future cash flow,
innovation.
Not face value.
Does Low Nominal Value Mean Cheap Stock?
No.
This is a common beginner mistake.
A ₦1 nominal value stock trading at ₦100 may still be cheaper fundamentally than:
another ₦1 nominal value stock trading at ₦10.
Because valuation depends on:
profits,
debt,
growth,
cash flow,
dividend quality,
management quality.
Not nominal value.
Bonus Concept: Premium
If a company issues shares above nominal value:
Example:
nominal value = ₦1,
issued to investors at ₦20,
then:
₦1 goes to share capital,
₦19 becomes share premium.
That premium strengthens the company’s equity base.
The Main Thing to Remember
Nominal Value
= legal/accounting face value.
Market Value
= what investors believe the company is worth right now.
And in investing, market value is usually the one that matters most.
Why is Airtel Africa share price higher than MTN Nigeria even though MTN has a larger market cap?
This is a very good question, and many beginners get confused by it. The key thing to understand is this: share price and market capitalization are not the same thing. Share price is the price of one unit of a company’s stock. Market capitalization is the total value of the company, calculated as shRead more
This is a very good question, and many beginners get confused by it.
The key thing to understand is this: share price and market capitalization are not the same thing.
Share price is the price of one unit of a company’s stock.
Market capitalization is the total value of the company, calculated as share price multiplied by the total number of shares.
So a company can have a lower share price but still be bigger in total value if it has more shares outstanding.
Using MTN Nigeria and Airtel Africa as an example, Airtel has fewer shares in the market compared to MTN. Because of this, each Airtel share carries a higher price, while MTN has more shares, which spreads its total value across more units, making the price per share lower.
Share price alone does not tell you how big or valuable a company is. What really matters is the total market capitalization, not just the price of one share.
So when comparing stocks, do not judge by price alone. Always consider the overall size of the company, its business strength, earnings, and long term performance.
See less