Is Safaricom Good For You?
by andrew@JijniMarkets - Wed 13 Aug 2008
I've been reading a lot of negative hype lately about Safaricom. Mainly because the price didn't double or triple like KenGen did, the talk is that either the stock shouldn't have been listed or buying it was a mistake.
The reason Safaricom has not drastically shot up (or down) is because it was correctly priced unlike KenGen which was severely under-priced. How do I know this? Its P/E ratio is currently at 14 and given that the market average (locally and globally) tends to be around 10-20 I'd say this is a good indication that it is not overvalued and that its price is in line with its earnings. Of course this is not the only criteria to judge a stock by but a strong brand and customer base as well as a strong balance sheet mean that the company has good fundamentals. I agree that it is not an exciting stock (i.e. it will not drastically bounce around from day to day) but in the long term it will tend to grow - provided of course the fundamentals remain as sound as they are which any sensible investor should keep monitoring. So far, I've not seen or heard anything to dissuade me that the fundamentals have changed.
The price may very well keep going down as people with short-term views sell as they look for more excitement elsewhere. But as any value investor knows, boring is good. As others rush out the door looking for excitement, value investors walk in looking for peace and quiet... and steady growth.
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