Book Value and Net Worth Analysis of Nepali Companies

In the Nepal Stock Exchange (NEPSE), understanding Book Value and Net Worth is vital for every investor seeking to evaluate a company’s true financial strength. While market price fluctuates daily due to sentiment and speculation, a company’s book value represents its intrinsic, real worth — the total value of assets remaining after deducting all liabilities. For Nepali investors, especially in the banking, insurance, and hydropower sectors, analyzing book value is a fundamental step in identifying undervalued or overvalued stocks.

Book Value is calculated as:

Book Value = Total Assets – Total Liabilities

When divided by the total number of shares, it gives the Book Value per Share (BVPS):

BVPS = (Total Assets – Total Liabilities) ÷ Total Outstanding Shares

This figure tells investors how much each share is worth based on the company’s actual balance sheet. For example, if a company has total assets worth Rs. 10 billion and total liabilities of Rs. 8 billion with 10 million shares outstanding, the book value per share will be Rs. 200. If the company’s market price is trading below this level, it may indicate an undervalued opportunity — provided other fundamentals remain sound.

Net Worth, on the other hand, represents the shareholders’ equity or the ownership value in a company. It includes paid-up capital, reserves, retained earnings, and any other surplus. In simple terms, it is the total wealth shareholders collectively own after all debts are settled. For banks and financial institutions in Nepal, Net Worth is also a key regulatory metric monitored by the Nepal Rastra Bank (NRB) to ensure capital adequacy and financial stability.

Comparing Book Value and Market Price provides insights into valuation ratios like the Price-to-Book (P/B) Ratio, which is calculated as:

P/B Ratio = Market Price per Share ÷ Book Value per Share

A P/B Ratio below 1 often suggests that the stock is trading below its intrinsic value — a potential buy signal for long-term investors. However, investors must ensure the company’s assets are real, not inflated, and that its profitability supports long-term growth.

Sandeep Kumar Chaudhary, Nepal’s leading Technical and Fundamental Analyst and founder of the NepseTrading Training Institute, emphasizes that “Book Value and Net Worth are the backbone of valuation. They show what remains if everything else disappears — the true strength of a company lies here.” With 15 years of experience in banking and market analysis, and having trained over 10,000 investors, he teaches how to combine book value with earnings and dividends to identify stable, long-term wealth-building opportunities in NEPSE.