How many companies are on the verge of collapsing in terms of share price? Which sector leads in this aspect?

Thu, Sep 5, 2019 2:38 PM on Exclusive, Latest, Stock Market,
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People invest in the shares of the company in a hope that they can make good earnings in the form of dividend or capital gains. Over the period of time, stock market is expected to rise in value thus increasing the shareholder’s wealth. However, investing in stock market is often considered risky unless done through careful understanding and market analysis.  Frequent fluctuations in the stock prices has made people to exit the market, while some has made fortunes.

Listed companies in NEPSE have par value of Rs 100 (expect SHL and mutual fund schemes), trading above which signifies gain and vice-versa. Today we look into the companies are trading below their par value along with companies that are trading below their networth.

BELOW PAR

As of 18th Bhadra 2076, there are total 18 companies across two sectors, i.e. Finance Companies and Hydropower Companies, that are trading below the par value. Best Finance Company (BFC) trades lowest in Finance sector at Rs 92, while Khani Khola Hydropower (KKHC) shows dismal performance at stock market with its price as low as Rs 56. This implies that an investor has lost Rs 44 per share of KKHC, if bought at face value. Granting companies permission to issue IPO despite having poor or below average fundamentals have triggered such declines.

BELOW NETWORTH

Trading of stocks below its net worth generally indicates that the market price of the stock is currently undervalued. In NEPSE, there are 21 companies that are traded below their per share net worth. Among 8 different finance companies, highest difference is seen in GUFL with highest gap of Rs 27.43. While in hydropower, CHL trades Rs 28.16 below its net worth. Similarly, NTC also faces such discrepancy between net worth and market value by Rs 25.21.

As the market price is determined by investors’ sentiments towards the performance of the company, overall market decline coupled with poor earnings of the companies than expected could be a reason for such low market price.

(Note: Data for Networth is retrieved from 4th quarter report of 2075/76 and market price are based as of 18th Bhadra 2076. Investors are requested to make thorough analysis for any buying and selling of transactions. Invest wisely! )