Glossary
Plain-language definitions of the valuation terms used across NSE Alpha — in English, Swahili and Sheng.
How many shillings investors are paying for every 1 KES of company profit.
Calculated as Share Price ÷ Earnings Per Share. A lower P/E can mean the stock is cheap relative to its profits, but it can also signal that the market expects earnings to fall. Always compare a stock's P/E to its sector benchmark, not in isolation.
The average P/E ratio of comparable listed companies in the same NSE sector.
Used as a benchmark to judge whether a stock is cheap or expensive relative to peers — for example, a Kenyan tier-1 bank trading at a P/E well below the banking sector average may be undervalued, while one trading well above may be priced for growth that has to materialise. Data source: aggregated from the NSE Daily Price List, CMA Kenya Quarterly Statistical Bulletins, and broker research notes (AIB-AXYS, Faida, Sterling, Genghis, Mwango Capital). Refreshed every Monday after market close, and updated mid-week when a constituent reports new audited earnings.
Data source: NSE Daily Price List · CMA Kenya · Broker notes
The reference P/E value an investor compares a single stock against — typically the median P/E of its sector peers.
While Industry P/E is the raw average across a sector, the Sector Benchmark P/E is what NSE Alpha actually scores against. We use the median rather than the mean to avoid distortion from one or two outlier stocks, and we exclude companies in loss positions (negative EPS) because their P/E is mathematically meaningless. The benchmark is the line your stock's P/E is compared to when we say it is 'undervalued', 'fair' or 'expensive'.
Net profit divided by the number of shares outstanding.
EPS shows how much profit each share earned over the period. Rising EPS over multiple periods is one of the cleanest signals of underlying business strength. Watch out for one-off gains (asset sales, fair-value revaluations) that inflate EPS without representing recurring earnings power.
An estimate of what a share is actually worth based on the company's fundamentals, independent of today's market price.
NSE Alpha estimates intrinsic value using earnings power, growth, sector benchmark P/E, and balance sheet strength. The gap between intrinsic value and current market price is what creates a margin of safety — or a warning sign.
The discount between a stock's intrinsic value and its current market price.
Coined by Benjamin Graham and championed by Warren Buffett: never pay full intrinsic value — demand a cushion in case your estimates are wrong. NSE Alpha treats an MOS above 25% as a strong BUY signal, 0–25% as fair, and negative MOS as overpaid.
How efficiently a company turns shareholder equity into profit.
Calculated as Net Income ÷ Shareholder Equity. Buffett's rule of thumb is to favour businesses that compound capital at 15% ROE or higher, sustainably, with low debt. Watch for ROE that is high only because debt is high — that is leverage, not quality.
How much of the business is funded by debt versus shareholders.
Total Debt ÷ Shareholder Equity. Lower is generally safer. For Kenyan non-bank companies, a D/E above 1.5x is a yellow flag and above 2x is a red flag. Banks naturally run higher D/E and should be judged with sector-specific ratios like Capital Adequacy instead.
Operating cash flow minus capital expenditure — the real cash left over to pay dividends or grow.
Profit can be massaged with accounting choices; cash cannot. A company with consistently positive FCF can pay dividends, reduce debt, and reinvest without diluting shareholders. Persistently negative FCF, especially alongside reported profits, is a warning sign.
Annual dividend per share divided by current share price, expressed as a percentage.
A high yield is attractive but unsustainable yields (e.g. >12% on NSE) often signal that the market expects the dividend to be cut. Always check the payout ratio (dividend ÷ EPS) — a payout above 100% is being funded from reserves or debt, not earnings.
The price at which the stock would be neither cheap nor expensive given its fundamentals.
NSE Alpha derives Fair Price from EPS × Sector Benchmark P/E, with light adjustments for growth and balance sheet quality. Buying below Fair Price creates a margin of safety; buying above means you are paying for future growth that must actually deliver.