Nigerian stock market posts robust gains led by SCOA Nigeria, but analysts warn high valuations and concentrated rallies require caution

Nigeria’s stock market closed February on a slightly softer note, with the All-Share Index (ASI) settling at 192,826.8 points, just below the 193,000 mark.

Also read: Nigerian Stock Market Gains N4.08 Trillion Amid Strong Earnings

Despite this minor retreat, the benchmark index has posted an impressive 23.91% year-to-date gain, lifting total market capitalization to N123.77 trillion.

However, market gains remain concentrated among small- and select mid-cap stocks, highlighting performance disparities across the broader market.

SCOA Nigeria Plc emerged as a standout performer, surging 437% year-to-date to close February at N38.15 per share, up from N7.10 at the start of 2026.

This followed a 245% gain in 2025. Another high-flying stock, Zichis Agro-Allied Industries Plc, has faced temporary trading suspension amid unusual price movements.

Despite strong price appreciation, trading volumes for SCOA remain modest.

Approximately 8.81 million shares, or 6.6% of the free float, changed hands between January and February 2026, suggesting that constrained supply rather than broad institutional accumulation may have driven the rally.

From a fundamental perspective, SCOA has recorded a recovery. Revenue rose 41% year-on-year in 2025 to N8.36 billion, and profit after tax more than doubled to N477.9 million.

However, negative operating cash flow of N8.69 billion, rising receivables, inventory, and a 230% increase in interest-bearing debt to N11.89 billion indicate the balance sheet remains under pressure.

Valuation metrics show SCOA trades at nearly 80 times trailing earnings and roughly 3 times sales, a sharp expansion from a P/E of 15x at the end of 2025.

Analysts note that to justify current multiples, 2026 profit would need to grow 160–245% over 2025 levels.

While SCOA presents a compelling turnaround story, its current valuation positions it as a forward-growth bet rather than a pure recovery play.

Investors are advised to monitor earnings, cash flow, and balance sheet health before committing further capital.

Also read: Nigerian Stock Market Downturn Wipes Off ₦4.6trn

Market watchers continue to focus on high-flying small- and mid-cap stocks, assessing whether rallies are supported by fundamentals, liquidity, and sustainable valuations.