Reading a NEPSE company's financials: EPS, P/E and book value for beginners

A new investor I know bought a share because "it kept going up." When I asked what the company earned per share, or what it was worth on paper, there was a pause. That pause is the entire problem with how most people pick NEPSE stocks. Price tells you what others are paying. It tells you nothing about what you are buying.

Three numbers fix most of that blindness: earnings per share, the price-to-earnings ratio, and book value. None of them needs a finance degree. All of them are published, free, for every listed company.

EPS: the profit behind one share

Earnings per share is net profit divided by the number of shares. If a company earns Rs 1 billion and has 100 million shares, EPS is Rs 10. Simple enough. The Nepali twist is in how it is reported.

Listed companies publish unaudited quarterly results, and they present an annualized EPS so the quarters can be compared on a yearly basis. The period's earnings are scaled up to twelve months. A bank that earned Rs 5 per share in the first quarter shows an annualized EPS near Rs 20. That is useful for comparison, but it has a trap built in: a single unusually strong quarter inflates the annualized figure, and the audited year-end number can land lower. Annualized EPS is a projection, not a result.

This also differs from trailing-twelve-month EPS, which adds up the actual last four quarters. When you read an EPS on a data portal, know which one it is.

P/E: what you pay for each rupee of profit

The price-to-earnings ratio is market price divided by EPS. At a share price of Rs 400 and an annualized EPS of Rs 20, the P/E is 20: you are paying Rs 20 for every Rs 1 of annual profit. A high P/E means the market expects growth or is simply excited; a low one means modest expectations or a sector out of favour.

What is "normal" on NEPSE? Some recent anchors, all of which move and should be re-checked live:

• Overall market P/E was about 38 as of 28 October 2025, against a historical average near 31 and a past peak around 42. The market was trading well above its own long-run norm.
• Commercial banks were the cheapest major sector at roughly 16, the one segment described as still undervalued against that 38.
• Microfinance and life insurance have historically traded far higher, often on speculation rather than earnings.

The takeaway is not "buy low P/E, avoid high P/E." It is that a P/E only means something against the company's own history and its sector peers. A bank at a P/E of 16 and a microfinance at 45 are not directly comparable. The NEPSE sectors post breaks down what each sector is and why their multiples differ.

Book value: what the share is worth on paper

Book value per share, also called net worth per share, is shareholders' equity (total assets minus total liabilities) divided by the number of shares. It is the accounting value left for shareholders after every debt is paid. Take a company with Rs 10 billion in assets, Rs 8 billion in liabilities and 10 million shares: equity is Rs 2 billion, so book value per share is Rs 200.

Two anchors make this readable in Nepal:

• Par value is Rs 100. A net worth per share of Rs 200 means the company has accumulated Rs 100 of reserves and retained earnings above the original par. Net worth below Rs 100 is a warning that the company has eroded its capital.
• Price-to-book (P/B) is market price divided by book value per share. A P/B below 1 can flag undervaluation; on NEPSE, banks commonly trade between 1 and 3 times book. As a market, NEPSE's P/B was around 2.8 in late October 2025.

Net worth matters most where regulation forces it. NRB requires a commercial bank to hold at least Rs 8 billion in paid-up capital and to keep a capital adequacy ratio of at least 11%; the banking sector sat around 13% in mid-2025. A bank whose net worth is sliding toward its regulatory floor is a different proposition from one comfortably above it.

A worked example

Real numbers make it concrete. In the full-year FY 2081/82 results, annualized EPS across the twenty commercial banks ranged from about Rs 38 at the top (Everest Bank) down to roughly Rs 1 at the bottom (NIC Asia), with a sector average near Rs 18. Nabil sat around Rs 26.

Suppose a bank shows an annualized EPS of Rs 25 and trades at Rs 500. Its P/E is 500 ÷ 25 = 20. If its net worth per share is Rs 250, its P/B is 500 ÷ 250 = 2. You now know three things the price alone never told you: the company earns Rs 25 a share, you are paying 20 times that profit, and you are paying twice its on-paper value. Whether that is expensive depends on the sector and the bank's growth, but at least you are asking the right question.

Where to find every number

You do not compute these by hand. They are published.

• NEPSE official: nepalstock.com — live prices, indices, the market summary with the overall P/E.
• SEBON: sebon.gov.np — the regulator, filings and quarterly market indicators.
• ShareSansar, Merolagani, Investopaper, NepaliPaisa — the data portals most retail investors actually use; each company page carries EPS, P/E, net worth per share, and quarterly results.
• Company quarterly reports — the original source, published on the company's own site and via SEBON.

The numbers originate in those quarterly reports, which listed companies must publish within roughly a month of each quarter-end. Nepal's fiscal quarters end in Ashoj, Poush, Chaitra and Asar, so the reporting season clusters a few weeks after each. Before you buy your first share, the TMS step-by-step covers the accounts you need; this post is about reading the company once you can trade it.

Five traps that fool beginners

1. Bonus and rights dilution. A bonus or rights issue increases the share count, so EPS falls and the price is adjusted on the ex-date. Compare an unadjusted price to a freshly diluted EPS and the P/E reads wrong. The right shares vs bonus vs dividend post explains the mechanics.
2. Annualized EPS overstating. One strong quarter, scaled to a year, can make a company look cheaper than it is.
3. Negative net worth. SEBON has in past reviews flagged dozens of companies trading at P/E ratios above 100 with negative earnings and net worth below their share price. A price detached from any earnings or book value is a speculation, not an investment.
4. Paid-up capital versus market cap. Par-value-based paid-up capital is not what the market values the company at. Only market cap (shares times price) is.
5. Chasing high-multiple sectors. Extreme microfinance and small-float multiples reflect thin supply and speculation, not proportional earnings.

Two more ratios worth a glance

Beyond the core three, two quick checks help. Return on equity (ROE) is net profit divided by shareholders' equity; for Nepali banks, somewhere in the 12% to 18% range is generally considered healthy. Dividend yield is the cash dividend per share divided by the price, and on NEPSE it pays to separate a cash dividend (real profit returned) from a bonus share (capital restructured), a distinction the bonus vs cash dividend post draws out.

What you actually need to know

• EPS, P/E and book value answer what price alone cannot: what the company earns, what you are paying for those earnings, and what the share is worth on paper.
• Annualized EPS is a projection. A single strong quarter flatters it, so confirm against trailing or audited figures before trusting a low-looking P/E.
• Compare to history and sector, never in isolation. A P/E of 20 is cheap for one sector and dear for another; the late-2025 market sat near 38 while banks sat near 16.

The market P/E (about 38 in late October 2025), the index level (around 2,724 in mid-June 2026), and sector multiples all move continuously, so the specific figures here are dated anchors, not today's values. Pull the live numbers from NEPSE or a data portal when you read a company. For help reading a specific company's quarterly report, email parjanya57@gmail.com.

This post is part of the Nepal Money Basics guide — the investing section.