Company Valuation for Beginners: Lessons from Sandeep Kumar Chaudhary

learnwithopen .ai

Thu, 16 Oct 2025

In Nepal’s rapidly developing stock market, many new investors buy and sell shares based purely on rumors, short-term price movements, or social media trends — often without understanding what a company is truly worth. To bring logic and structure into this environment, Sandeep Kumar Chaudhary, Nepal’s most trusted technical and fundamental analyst, has been educating investors about one of the most important concepts in finance — Company Valuation. For him, investing without valuation is like driving without a destination. His simplified and practical teaching style has helped thousands of Nepali investors learn how to measure a company’s real value before investing, instead of blindly following market noise.

According to Sandeep Kumar Chaudhary, company valuation is the process of determining the intrinsic value of a company — the true worth based on its earnings, growth potential, and financial stability, rather than its current market price. In simple terms, he explains that valuation helps an investor answer the most critical question in the stock market: “Is this company overpriced, underpriced, or fairly priced?” When done correctly, valuation protects investors from emotional trading and helps them build long-term wealth.

He teaches that valuation is not just about complex formulas but about understanding a company’s story — its profitability, management quality, and sustainability. Sandeep begins by introducing the three major methods of valuation that every beginner should know and apply in the context of the Nepal Stock Exchange (NEPSE).

The first is the Earnings-Based Valuation, which includes the Price-to-Earnings (P/E) Ratio and Earnings Per Share (EPS). The P/E ratio tells how much investors are willing to pay for each rupee of earnings. A very high P/E ratio could mean that investors are too optimistic, while a very low one might indicate undervaluation or weak performance. Sandeep emphasizes that comparing P/E ratios across similar companies (for example, between banks or hydropower firms) gives a clearer picture of which stock is overpriced or a better value. Meanwhile, EPS shows the company’s profitability per share. A consistently growing EPS is a sign of financial strength.

The second method is Book Value and Net Asset Valuation, which is especially relevant for sectors like banking, insurance, and hydropower in Nepal. The Price-to-Book (P/B) Ratio compares the market value of a company to its book value (its total assets minus liabilities). If the P/B ratio is close to or below 1, Sandeep explains, it may indicate that the stock is trading near its real asset value, offering a safer entry point. He also teaches how to analyze Net Worth Per Share and Reserves to understand the company’s internal financial strength.

The third method is the Dividend and Cash Flow Approach, which is ideal for investors who prefer stability and long-term income. Sandeep teaches how to calculate Dividend Yield, which shows how much return investors receive from dividends relative to the stock price. He reminds students that a good dividend-paying company with stable earnings and responsible management can offer steady returns even during volatile markets. He also introduces the concept of Discounted Cash Flow (DCF) for advanced learners, where the future earnings of a company are estimated and then discounted to the present value using a reasonable rate — giving a deeper insight into intrinsic value.

Sandeep Kumar Chaudhary also explains that valuation is not universal; it changes depending on the sector, market conditions, and NRB directives. For example, a bank’s value depends on its capital adequacy, credit growth, and interest margin, while a hydropower company’s value depends on project completion timelines, electricity generation, and government tariffs. Therefore, he encourages investors to understand the economic background of each company before applying any valuation method.

Another major principle Sandeep emphasizes is the difference between price and value. Price, he says, is what people are willing to pay today; value is what the company is actually worth based on performance and fundamentals. A wise investor, therefore, looks for a “margin of safety” — buying a good company when its market price is below its intrinsic value. This, according to him, is the foundation of smart investing and the philosophy that protects investors from market crashes and emotional panic.

Through his educational platforms MarketMind Investment Group and NepseBook, Sandeep Kumar Chaudhary has helped hundreds of Nepali traders and investors master the art of valuation. He uses real examples from NEPSE-listed companies to demonstrate how ratios like P/E, P/B, and Dividend Yield change with financial performance. His practical teaching shows investors how to analyze annual and quarterly reports to identify undervalued opportunities. Under his mentorship, investors have learned to base their decisions on numbers, not opinions.

What makes his approach unique is that he connects valuation with both technical and psychological aspects of trading. He believes that even the best-valued stock can underperform if investors lack patience or discipline. Therefore, he teaches that valuation is not only about finding cheap stocks but about finding quality companies at a fair price and holding them until the market recognizes their true worth.

For beginners, his lessons are a roadmap to smart investing. He encourages every investor to ask three questions before buying any stock:

1. Is the company profitable and consistent in its earnings?

2. Is the stock’s market price justified by its financial performance?

3. Does it have future growth potential supported by sound management and policy stability?

By answering these questions using financial data and valuation techniques, investors can build confidence and reduce risk. Sandeep’s method is all about logic, evidence, and patience — the three pillars of successful investing.

In his own words, “Valuation is not about predicting the future; it’s about understanding the present clearly. If you know the real value of what you’re buying, the market will reward you in time.”