The document discusses key financial metrics for evaluating companies using the relative value technique. It provides metrics such as price-to-earnings ratio, earnings per share, return on equity, and dividend payout ratio for four companies - Sanima BPHCL SWWL and Yeti. It finds that Swabalamban bank has the highest P/E ratio and EPS, indicating high anticipated future growth. It also notes that retention ratio is an important metric, as companies with high retention ratios can grow more quickly by reinvesting a larger portion of earnings back into the business.

1. RELATIVE VALUE TECHNIQUE ( Part of fundamental equity valuation technique)
Sanima BPHCL SWWL Yeti
Closing market price ( 28th
july) 827 921 2700 410
net profit (annualized) 1340832000 1171074000 398988000 419632000
reserve/surplus 1040821000 1996029000 553479000 -129802000
paid-up capital 3060288000 1673223000 312380000 1386233000
number of shares 30602880 16732230 3123800 13862330
book value per share 134.01 219.29 277.18 90.64
EPS 43.81 69.99 127.73 30.27
P/E ratio 18.88 13.16 21.14 13.54
ROE 32.69% 31.92% 46.08% 33.40%
Total equity 4101109000 3669252000 865859000 1256431000
Dividend(2015) 21.05 20 52.63 0
DPR 0.48 0.29 0.41 0
Retention ratio(RR) 0.52 0.71 0.59 1
P/B ratio 6 4.20 9.74 4.52
Expected growth rate(g) 0.17% 0.23% 0.27% 0.33%
Dividend Yield ratio 0.03 0.02 0.02 0
Sustainable growth rate(SGR) 16.99% 22.80% 27.09% 33.40%
Commentary
P/E ratio: Generally high P/E ratio indicates investor anticipating high earning growth in the future.
Average market P/E ratio should be in between 20-25 times. Here Swabalamban bank P/E ratio is higher
than other company’s stock. This company stock falls under the “growth stock” where investors are
paying more/or today earnings anticipation of the future growth. Here low P/E ratio (BHPCL & Yeti)
indicate that a company may currently be undervalued stock due to its characteristics or the company is
doing exceptionally well relative to its past trend.
EPS: investors or potential buyer want to know what their share of profit is, not just only amount. It is a
presentation of profit on a per share basis. Higher EPS means that company is capable of generating
dividend to the stockholders or may plow money back to business to grow more rapidly in the industry.
Here Swabalamban bank has high EPS and after that BPHCL Company has.
Retention Ratio (RR): company with high retention ratio grows more quickly in the industry. Example
Apple, Intel, google, retain a large portion of its earning to fund in superior investment projects. Here in
Nepal, company like SCB, HBL & Everest has low retention ratio.
Grow more quickly because it has more capital to spend on all aspects of its business.

2. RELATIVE VALUE TECHNIQUE ( Part of fundamental equity valuation technique)
SGR: the maximum growth rate a firm can sustain without having to increase financial leverage
(borrowing). It shows how company grows quickly without borrowing debt/issue of FPO or rightshare
from the market.