Based on the Graham formula, the stock price of 8 commercial banks and 10 development banks are undervalued.
Currently, the stock price of Nepal Bank, NCC Bank, Nepal Bangladesh Bank, Century Commercial Bank, Citizens Bank, Bank of Kathmandu, Kumari Bank and Prabhu Bank are undervalued. The Graham Fair Value of Nepal Bank is Rs 382.78, however, the price of the stock is Rs 292 in the market. Thus, the stock is undervalued by 31.9 percent. Similarly, NCC Bank is undervalued by 11.31, Nepal Bangladesh by 11.04, Century by 10.55, Citizens by 5.62, Bank of Kathmandu by 4.89, Kumari by 2.41 and Prabhu bank is undervalued by 0.13 percent.
Meanwhile, the stock price of Standard Chartered Bank is highly overvalued. The Graham Fair Value for the stock is 351.20, however, the price of the stock is at Rs 735. Thus, the stock is overvalued by 52.22 percent.
Likewise, out of 21 development banks, the stock price of 10 development banks are undervalued while 11 are overvalued. Among the 10 undervalued stocks, Corporate Development Bank is the most undervalued stocks. The stock is 56.72 percent undervalued. Similarly, the stock of Sahayogi Bikas Bank is undervalued by 43.29, Lumbini Bikas Bank 25.44, Deva Bikas Bank 20.45, Sangrila Development bank 18.69, Mahalaxmi Bikas Bank 17.16, Gandaki Bikas Bank 16.73, Kailash Bikas Bank 8.77, Kamana Sewa Bikas Bank 6.22 and Jyoti Bikas Bank is undervalued by 6.21 percent.
Meanwhile, ousting Sahara Bikas Bank whose trading is suspended, Mukti Bikas Bank is the highly overpriced stock. It has Graham fair Value of 251.26, however, its price is at Rs 360 in the domestic stock market.
What Is the Graham Number?
The Graham number is a figure that measures a stock's fundamental value by taking into account the company's earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued and thus worth investing in. The formula is as follows:
The term is also sometimes referred to as Benjamin Graham’s number.
