BUA vs. Flour Mills: Which Is a Better Stock?

History of BUA

BUA Foods PLC is a Lagos, Nigeria based company that was founded in 2008.

History of Flour Mills

Flour Mills Nigeria Plc was incorporated in 1960 and is headquartered in Lagos, Nigeria. The company is into flour milling business in Nigeria and internationally.

The Various Ratios and What They Mean

Financial ratios offer investors a way to evaluate their company’s performance and compare it to other similar businesses in their industry. It measures the relationship between two or more components of the financial statement.

  • Liquidity ratios
  • Leverage/Debt ratios
  • Efficiency ratios
  • Profitability ratios
  • Market value ratios

Profitability ratios

Profitability ratios measure a company’s ability to generate income relative to revenue, balance sheet assets, operating costs, and equity. Some of the ratios under this category are:

  • Return on Equity (ROE)
  • Return on Capital Employed (ROCE)
  • Net Profit Margin

Efficiency ratios

Efficiency ratios are used to measure how well a company is utilising its assets and resources. These ratios generally examine how many times a business can accomplish a metric within a certain period of time. Two of these ratios are given below:

  • Asset Turnover Ratio: This measures how efficient a company uses its assets to generate sales.
  • Inventory Turnover Ratio: This measures how many times a business sells and replaces its stock of goods in a given period of time.

Debt Ratios

This measures the amount of capital that comes from debt. In other words, leverage financial ratios are used to evaluate a company’s debt levels. Some of these ratios are:

  • Debt-to-Equity Ratio, which calculates the weight of total debt and financial liabilities against shareholders’ equity.
  • Interest Coverage Ratio, which shows how easily a company can pay its interest expenses.
  • Debt Service Charge Ratio, which reveals how easily a company can pay its debt obligations.

Conclusion

In conclusion, BUA appears to be more profitable than Flour Mills based on our computed ratios. BUA’s high profit margin can be attributed to high revenue from the sales of sugar. Our analysisT further revealed that Flour Mills efficiently used its assets compared to BUA. Although inventory turnover gave a different picture as findings revealed that BUA turned over its inventories more than Flour Mills.

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MoneyAfrica

MoneyAfrica

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We look at the financial angle. From Personal finance to finacial literacy, strategy and wealth creation. instagram.com/moneyafrica