By Olatunbosun Obafemi
The Nigerian Exchange (NGX) has its fair share of expensive stocks – companies trading at valuations that appear sky-high by traditional metrics, yet continue to attract strong investor demand.
From power and cement to consumer goods, real estate, and hospitality, several companies are priced far above sector averages, sparking questions: why are investors paying so much?
To understand, it helps to think of the stock market as a supermarket. When two similar bottles of water sell for ₦500 and ₦200, you ask why one costs more. In equities, valuation ratios such as Price-to-Earnings (P/E), Price-to-Sales (P/S), and Price-to-Book (P/B) help investors decide whether a stock is cheap, fair, or expensive.
Industrial Sector – BUA Cement
In the industrial sector, BUA Cement stands out with a P/E of 26x, P/B of 10x, and P/S of 5x. Historically, its net income had declined at a 9% CAGR to ₦74 billion. But H1 2025 flipped the narrative: profits surged to ₦181 billion. This sharp rebound has given investors confidence, supporting its premium valuation. Growth-focused investors see opportunity, though skeptics warn past volatility suggests caution.
Consumer Goods – Champion Breweries, International Breweries, BUA Foods
The consumer goods space has some of the market’s hottest names. Champion Breweries has gained over 345% year-to-date, thanks to a Q2 2025 pre-tax profit of ₦1.7 billion, up 269% YoY, lifting H1 profit to ₦3.4 billion. With P/B of 10x and P/S of 6x, expectations are sky-high; any slip could trigger a sharp pullback.
International Breweries trades at a lofty P/E of 38, but lower P/B and P/S multiples of 4x and 3x. Its H1 2025 turnaround – from a ₦150.2 billion loss last year to ₦61.5 billion profit – explains why investors are piling in. The stock is up 123% YtD, though the high multiple reflects lingering risk.
BUA Foods remains one of the priciest, with P/B 15x, P/S 6x, and P/E 26x. Its dominant market position justifies part of the premium, but any slowdown could weigh heavily.
Oil & Gas – Conoil, Total Energies
The oil and gas sector’s most expensive names are Conoil (P/E 84x) and Total Energies (P/E 53x), far above the sector average of 27x. Conoil continues to grow earnings at 43% CAGR, reporting ₦900 million profit in H1 2025. Total, meanwhile, boasts a five-year CAGR of 68%, though it slipped to a ₦2.8 billion loss in H1 2025. Their P/S ratios remain below sector averages, suggesting investors are betting on earnings momentum rather than revenue growth.
Real Estate – UPDC
In real estate, UPDC leads with a P/E of 46x and P/B of 13x. Its profit rebounded from ₦160 million in 2022 to ₦432 million in 2024, and surged to ₦1.8 billion in H1 2025. Investors are pricing in sustained recovery, but at these levels, any slowdown could quickly cool sentiment.
Hospitality & Tourism – Transcorp Hotels
Transcorp Hotels is priced for perfection, with eye-popping multiples: P/E 99x, P/B 20x, P/S 19x. The stock’s valuation reflects its dramatic turnaround – from a ₦6 billion loss to ₦14.9 billion profit in 2024, and ₦8.7 billion profit already in H1 2025. Still, at nearly 100x earnings, even a modest earnings dip could make the stock look dangerously overvalued.
Utilities/Power – Geregu Power
Perhaps the priciest of all, Geregu Power trades at a P/E of 103x. Investors are effectively paying ₦103 for every ₦1 the company earned in the past year. But with strong half-year results already outpacing much of 2024, optimism is running high. The question is whether Geregu can maintain its pace; if not, its stock could see a swift correction.
The Big Picture
Across sectors, these premium valuations reflect investor confidence in earnings recovery and growth momentum. But they also carry risk. A stumble in execution, regulatory shocks, or weaker-than-expected results could lead to sharp reversals.
For risk-tolerant, growth-focused investors, these stocks may still hold appeal. But for conservative players, the warning is clear: high multiples mean high expectations. And in the stock market, expectations can change quickly.
