What it is
The P/E ratio links what you pay to what the company earns. Share price Rs 450, EPS Rs 30: P/E = 15. You are paying 15 years of today's profit.
A low P/E can mean the share is cheap, or that investors expect profit to fall. A high P/E can mean expensive, or that investors expect strong growth. The number alone does not tell you which.
Punji shows P/E against the sector median on a doubling scale: half the median sits a quarter in from the left, twice the median a quarter in from the right. For banks, remember the EPS may be annualised from a part year.
Both price and EPS are per ordinary share. Where a bank also has preference shares, the EPS in the filing already excludes them.
How it is calculated
P/E = Market price per ordinary share ÷ Earnings per ordinary share (trailing or annualised).
Worked on Nabil Bank Limited, FY 2082/83 Q4
At a market price of Rs 534.90, NABIL's P/E on its FY 2082/83 EPS of Rs 28.36 is about 18.86. Compare with the commercial bank sector median shown in Punji.
NABIL's share capital includes Rs 500.00 crore of preference shares, so per-share figures here use its 27,05,69,970 ordinary shares, as the filing does.
What good looks like
There is no universal good number. Compare within the same sector and against the company's own history. Pair P/E with ROE and NPL: a low P/E on a bank with rising NPL is cheap for a reason.
Watch out
- A P/E on annualised Q1 EPS is a forecast.
- Negative or tiny EPS makes P/E meaningless; Punji leaves loss-makers out of the P/E list.
- After a bonus share, price and EPS both adjust; the P/E is unchanged if the market was efficient.
- Use EPS per ordinary share; banks with preference shares (such as NABIL) print the ordinary share count in the filing.
In Nepal
A Punji / textbook tool. No NRB or SEBON rule sets a P/E. NEPSE and Punji compute it from the latest published EPS, usually annualised.
Questions
No. It can mean the market expects profit to fall. Check why it is low before concluding it is cheap.
Usually the latest annualised EPS. Until Q4 that is a projection, so the P/E is one too.