Sandeep Kumar Chaudhary Explains All Key Financial Ratios for NEPSE Investors

learnwithopen .ai

Thu, 16 Oct 2025

In Nepal’s growing capital market, where thousands of investors enter the NEPSE each year hoping for quick profits, Sandeep Kumar Chaudhary has emerged as the voice of reason and education. Known as Nepal’s leading technical and fundamental analyst, he has transformed how Nepali investors understand the financial side of the market by teaching the true value of financial ratios. For him, ratios are not just mathematical figures on a company’s balance sheet; they are windows into its financial health, management efficiency, and long-term potential. His teaching makes fundamental analysis simple, practical, and relevant for every Nepali investor — from beginners to professionals.

According to Sandeep Kumar Chaudhary, financial ratios are the building blocks of fundamental analysis and the most powerful way to separate fundamentally strong companies from weak ones. He explains that while technical analysis tells a trader when to buy or sell, fundamental analysis tells what to buy and why. These ratios reveal how profitable a company is, how efficiently it uses its resources, and how stable it will remain in the future. For any serious investor, understanding these ratios is essential to making logical investment decisions rather than emotional ones.

He classifies financial ratios into several key categories that every NEPSE investor should know and apply. The first group is profitability ratios, which measure how well a company is generating profits. Here, he highlights three important metrics — Earnings Per Share (EPS), Return on Equity (ROE), and Net Profit Margin. EPS shows how much profit a company earns for each share owned, and ROE reveals how efficiently the company uses shareholder capital to create profit. In his view, companies with a consistently strong ROE above 15 percent are typically stable and investor-friendly. The net profit margin helps investors understand how much profit remains after all expenses, indicating how well a business manages costs and maintains competitiveness.

The second group is valuation ratios, which help determine whether a stock is fairly priced, overvalued, or undervalued. Among them, Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Dividend Yield are essential. Sandeep teaches investors that a balanced P/E ratio must be understood in the context of industry averages — a very high P/E might signal optimism, but it could also reflect overvaluation. Similarly, the P/B ratio shows how the market values the company compared to its net worth, and a strong, consistent dividend yield is often a sign of a company’s commitment to shareholders.

The third group, solvency ratios, shows how financially stable a company is and how well it can handle its debt obligations. Here, Debt-to-Equity (D/E) ratio is a crucial indicator, revealing whether a company is growing through debt or its own earnings. For banking and financial institutions, Sandeep focuses on Capital Adequacy Ratio (CAR) and Credit-to-Deposit (CD) ratio, both mandated by Nepal Rastra Bank (NRB). He explains how these ratios show whether a financial institution is safely managing its capital and maintaining a balance between lending and liquidity.

The final group, efficiency ratios, measures how effectively a company uses its resources to generate revenue. Sandeep teaches investors how to analyze Asset Turnover Ratio and Inventory Turnover Ratio to understand whether the company is using its assets efficiently and how well it manages its inventory flow. In sectors like manufacturing and trading, these ratios help detect whether a business is growing sustainably or simply expanding on borrowed capital.

What makes Sandeep Kumar Chaudhary’s approach unique is how he connects these financial ratios to Nepal’s real market environment. He uses examples from NEPSE-listed banks, hydropower companies, and insurance firms to explain how these ratios reflect actual performance. He teaches how NRB directives, changes in interest rates, inflation, or remittance inflows affect the financial ratios of these companies. For example, when NRB raises the CD ratio limit, it affects liquidity in banks, which in turn impacts their ROE and spread rate — information most retail investors overlook.

Sandeep also integrates technical insights with these fundamentals, explaining that a company with strong ratios but weak price momentum requires patience, while a company with both strong fundamentals and technical structure offers the best opportunity. This integrated analysis helps his students trade and invest with complete confidence. His teaching style is practical and rooted in Nepali realities — simplifying complex balance sheet data into actionable lessons.

Through his educational platforms MarketMind Investment Group and NepseBook, he has mentored hundreds of Nepali investors to read financial statements, interpret ratios, and understand company performance with clarity. His students learn to evaluate whether a company is worth investing in or just temporarily inflated by hype. Many of them now base their investment decisions on evidence, not assumptions — a transformation that Sandeep calls the beginning of a truly educated investor community in Nepal.

He often reminds his students that numbers never lie — it is the interpretation that matters. A company with stable ratios, disciplined management, and consistent growth is always safer than one that simply moves with market rumors. His ultimate goal is to create a new generation of Nepali investors who analyze before acting, focusing on long-term wealth rather than short-term excitement.

In his words, “Financial ratios are the x-ray of a company. They show you what’s healthy and what’s weak. If you can read them properly, you’ll never have to guess where to invest.”