The current market scenario shows that investors are more attracted to same companies despite having low ROE and high price. Although the investors succeeded to earn capital gain in short period by investing in such companies, however, in the long run, returns from such companies are bit low.
Moreover, lack of listed companies with high ROE in domestic market also pushed investors towards capital gain, as per some investors. Because of this, such underperformed companies are overpriced in NEPSE.
Nonethless, nearly a four dozen companies have ROE above 11 percent. ROE is calculated by dividing net income by shareholders’ equity.
As per the financial reports of last FY published by listed companies, Soaltee Hotel has the highest ROE of 25.45 percent while Nepal Insurance has 20.31 percent and Mahila Laghubitta has 18.59 percent.
Investing in companies with high ROE increases the possibility of earning more returns in long run.
