RELATIONSHIP BETWEEN EARNINGS PER SHARE

AND MARKET PRICE PER SHARE

A Project Work Report

By:
Bina Upadhaya
T.U Reg. No: 7-2-558-11-2019
Exam Roll No: ………………,
Aims College, Butwal

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of Bachelor of

Business Studies (BBS)

Butwal, Rupandehi
2024
 DECLARATION

I hereby declare that the project work entitled RELATIONSHIP BETWEEN

EARNINGS PER SHARE AND MARKET PRICE PER SHARE submitted to the
Faculty of Management, Tribhuvan University, Kathmandu is an original piece of work
under the supervisor of Mr. Bhoj Raj Pangeni, faculty member, Aims College, Butwal,
Rupandehi, and is submitted in partial fulfillment of the requirements for the degree of
Bachelor of Business Studies (BBS). This project work report has not been submitted to
any other university or institution for the award of any degree or diploma.

Signature:
Bina Upadhaya
Date.

ii
 ENDORSEMENT

We hereby endorse the project work entitled RELATIONSHIP BETWEEN

EARNINGS PER SHARE AND MARKET PRICE PER SHARE submitted by Miss.
Bina Upadhaya of Aims College, Butwal, Rupandehi in partial fulfillment of the
requirements for the degree of the Bachelor of Business Studies (BBS) for external
evaluation.

…………………………. ………………………….
Mr. Dipak Dhakal Mr. Dipak Dhakal
Head of Research Department Campus Chief

iii
 SUPERVISOR'S RECOMMENDATION

The project work report entitled RELATIONSHIP BETWEEN EARNINGS PER

SHARE AND MARKET PRICE PER SHARE submitted by Bina Upadhaya of Aims
College, Butwal, Rupandehi, is prepared under my supervision as per the procedure and
format requirements laid by the Faculty of Management, Tribhuvan University, as partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS).
Therefore, recommend the project work report for evaluation.

………………………………..
Mr. Bhoj Raj Pangeni

iv
 ACKNOWLEDGEMENT

This report entitled RELATIONSHIP BETWEEN EARNINGS PER SHARE AND

MARKET PRICE PER SHARE has been prepared for the partial fulfillment of the
requirement of Bachelor Degree of Business Studies (BBS) program the subject of
Business Research Methods. This report has been prepared under the Faculty of
Management, Tribhuvan University. This is based on research models involving the use
of quantitative and qualitative model to analyze the report.
First of all, I regard it as my dispensation and providence to get an opportunity to work
under the admirable supervision Mr. Bhoj Raj Pangeni and Campus Chief Mr. Dipak
Dhakal, who helped me by providing their suggestions and ideas time to time during the
preparation of the project. I would also like to thank to all my teachers, who helped me in
writing report and guided over time for the completion of my report.

Submitted by: Bina Upadhaya

BBS 4th Year
Aims College Butwal, Rupandehi

v
 TABLE OF CONTENTS
Declaration..........................................................................................................................ii
Endorsement.......................................................................................................................iii
Supervisor's Recommendation...........................................................................................iv
Acknowledgement...............................................................................................................v
Table of Contents................................................................................................................vi
List of Tables.....................................................................................................................vii
List of Figures..................................................................................................................viii
Abbreviations......................................................................................................................ix
CHAPTER - I INTRODUCTION....................................................................................1
1.1 Background of the Study............................................................................................1
1.2 Profile of Everest Bank Ltd.......................................................................................3
1.3. Problems of the Study...............................................................................................4
1.4. Objective of the Study...............................................................................................5
1.5. Rational of the Study.................................................................................................5
1.6 Review of the Literature............................................................................................5
1.7 Research Methodology..............................................................................................8
1.8 Limitations of the Study.............................................................................................9
1.9 Organization of the Study........................................................................................10
CHAPTER - II : DATA PRESENTATION AND ANALYSIS...................................11
2.1 Data Presentation.....................................................................................................11
2.2 Data Analysis...........................................................................................................14
2.3. Major Findings........................................................................................................17
CHAPTER-III : SUMMARY AND CONCLUSION...................................................18
3.1 Summary..................................................................................................................18
3.2 Conclusion...............................................................................................................18
BIBILIOGRAPHY..........................................................................................................19

vi
APPENDIX-I....................................................................................................................22

LIST OF TABLES

Table No. Title Page No.

Table 1: Profile of the Organization …………………………………………………..

4

Table 2 Statistical Analysis of Everest Bank Limited …………………………… 15

Table 2: Correlation Coefficient between Earning Per Share and Market price per share ...
16

vii
 LIST OF FIGURES

Figure No. Title Page No.

Figure 1: Market price per share of Everest Bank Limited …………………. 12

Figure 2: Earnings Per Share of Everest Bank Limited ………………………. 13

Figure 3: Price Earnings Ratio of Everest Bank Limited …………………….. 14

viii
 ABBREVIATIONS

ATMS : Automatic Teller Machines

BBS : Bachelor of Business Studies

CV : Coefficient of Variations

ed. : Edition

EBL : Everest Bank Limited

EPS : Earning Per Share

F/Y : Fiscal Year

i.e : That is

Ltd. : Limited

MPS : Market Price Per Share

n.d. : No date

P/E : Price Earnings Ratio

Reg. : Registration

Rs : Rupees

SD : Standard Deviation

T.U : Tribhuvan University

% : Percentage

& : And

ix
 1

CHAPTER - I

INTRODUCTION

1.1 Background of the Study

Market price per share (MPS) represents the current price at which a single share of a
company's stock is traded in the open market. It reflects the valuation that investors
assign to ownership in the company at a specific point in time. The determination of MPS
is influenced by various factors such as supply and demand dynamics, investor sentiment,
company performance, and broader market conditions (Bodie, Kane & Marcus, 2017;
Ross, Westerfield & Jordan, 2019).

Earnings per share (EPS) is a financial metric that indicates a company's profitability on a
per-share basis. It is calculated by dividing the company's net income by the total number
of outstanding shares. EPS is a fundamental measure used by investors and analysts to
assess a company's financial performance and profitability over a specific period. It
provides insight into the company's ability to generate profits for each shareholder and is
a key component in various financial analyses (Brigham & Houston, 2019; Horngren et
al., 2017).

Earnings per share (EPS) indicate the return earned per share. This ratio measures the
company's share market value. It points out whether the company has increased or not. It
symbolizes the part of a company's earning, net of taxes and preferred stock dividend that
is apportioned to each share of common stock. It refers to the ratio of the portfolio of the
profit after tax of the company for any financial years after tax of the company for any
financial years after payment of preference dividend (Islam khan, Chaudhary, Adnan,
2014).

The price-earnings ratio (P/E ratio) is a valuation metric that compares a company's
market price per share (MPS) to its earnings per share (EPS). It is calculated by dividing
the market price per share by the earnings per share. The P/E ratio is widely used by
investors to assess the market's perception of a company's growth prospects, profitability,
 2

and risk. A higher P/E ratio typically indicates that investors are willing to pay more for
each dollar of earnings, suggesting expectations of higher future growth (Gitman et al.,
2019; Brealey, Myers & Allen, 2017).

The relationship between market price per share (MPS) and earnings per share (EPS) of
commercial banks is a critical aspect of stock valuation and investor decision-making
within the financial sector. MPS represents the market's valuation of a bank's equity,
reflecting investor expectations, sentiments, and perceptions of the bank's performance
and prospects. On the other hand, EPS provides a measure of a bank's profitability per
outstanding share, serving as a key financial metric for assessing its operational
efficiency and financial health.

Understanding the dynamics of the MPS-EPS relationship is essential for investors,

analysts, and policymakers as it offers insights into the underlying factors driving stock
prices and market valuations of commercial banks. Factors influencing this relationship
include the bank's financial performance, asset quality, capital adequacy, regulatory
environment, macroeconomic conditions, and investor sentiment.

Empirical research in this area has explored the determinants and implications of the
MPS-EPS relationship, shedding light on how changes in earnings performance, market
conditions, and regulatory policies impact stock valuations and investor perceptions
within the banking industry (Altman & Saunders, 1998; Berger & Bouwman, 2009).
Additionally, studies have examined the degree of market efficiency in incorporating EPS
information into MPS, providing insights into the efficiency and transparency of bank
stock markets (Fama, 1970).

By analyzing the MPS-EPS relationship in commercial banks, researchers aim to

contribute to the broader understanding of stock valuation mechanisms, investor
behavior, and market dynamics within the financial sector. This research not only informs
investment strategies and risk management practices but also guides regulatory policies
aimed at promoting market efficiency, stability, and investor protection in banking
markets.

`Everest Bank Limited is entered into joint venture agreement with Punjab National
Bank. There are 127 branches including main branch (head office) in Nepal. The main
 3

purpose of Everest Bank Limited is to extend Professional banking services to various

sector of the society in Nepal. EBL providing various facilities such as Remittance, ATM
facilities, Letter of Credit, Foreign Exchange, Fixed Deposit, etc.

1.2 Profile of Everest Bank Ltd.

Everest Bank Limited (EBL) is founded in 1994. Everest Bank Limited is the
Commercial Bank of Nepal which is joint venture of Punjab National Bank, India which
holds 20% equity shares of Bank (Wikimedia, 2023). It is the first Nepalese Bank which
has Representative Office in India. The Bank has been one of the leading banks of the
country and has been catering its services to various segments of the society. With clients
from all walks of life, the Bank has helped the nation to develop corporately,
agriculturally & industrially.

Everest Bank Limited (EBL) provides customer-friendly services through its wide
Network connected through ABBS system, which enables customers for operational
transactions from any branches. The bank has 127 Branches, 162 ATM Counters, 32
Revenue Collection Counters and 3 Extension Counters across the country.

The Board of Everest Bank Ltd. appointed Mr. Sudesh Khaling as the first Nepali Chief
Executive Officer CEO in its 25-year journey. Earlier, the bank had been appointing only
Indian nationals as the CEO of the bank.
 4

Table 1

Profile of the Organization

Everest Bank Limited

Name of the organization Everest Bank Limited
Establishment Date 1994 AD
Nature of Bank Commercial Bank
Vision To be a Leading Commercial Bank with Pan Nepal
presence and become a household name, providing
wide range of financial products and services under one
roof.
Mission Growth through Banking for All Area Served Nepal
Industry Banking, financial services
Head office Kathmandu, Lazimpat
Authorized Capital Rs. 150000000
Subscribed & Paid up Capital Rs. 10698094436
Chief Executive Officer Mr. Sudesh khaling
No. of Employees 1097 Employees.
No. of Branches 127 Branches
No. of ATM 162 ATM
No. of Extension Counter 3 Extension counter
Products Loans, credit cards, saving, investment, Consumer
banking, corporate banking

Source: Annual Report of Everest Bank Limited, 2023

1.3. Problems of the Study

This is a vital issue to show the financial health of the bank. It promotes the interest of
promoters to invest in the competitive market. Therefore, this study is conducted to
answer the following questions:

 What is the Earning per share, market price per share and P/E ratio of Everest
Bank Limited?
 5

 What is the relationship between EPS and MPS of Everest Bank Limited?

1.4. Objective of the Study

The prime objective of the study are as follows:

 To analyze the earning per share, market price per share and P/E ratio of Everest
Bank Limited.
 To analyze the relationship between EPS and MPS of Everest Bank Limited.

1.5. Rational of the Study

The rationale for studying the relationship between market price per share (MPS) and
earnings per share (EPS) lies in its significance for investors, analysts, and companies.
Understanding this correlation can provide valuable insights into the market's perception
of a company's performance and its growth potential. Investors often use MPS and EPS
as key indicators when making investment decisions. Analyzing the relationship between
these two metrics helps investors assess the market's confidence in a company's ability to
generate profits. A positive correlation may indicate that the market values the company's
earnings, signaling a potential for stock price appreciation. Conversely, a divergence
between MPS and EPS could suggest underlying concerns or mispricing. At last
investigating the relationship between MPS and EPS is essential for making informed
investment decisions, guiding corporate strategies, and advancing our understanding of
market dynamics.

1.6 Review of the Literature

A literature review can be either part of larger report on research work or thesis or a book
that is published or unpublished. We use review of literature to understand our research
problem better and know the methodology that can be used in current research. The
literature review section of the study covers the overview of the Nepalese banking system
and earning to price, the theoretical and empirical review in the areas of earning per
share, market price per share, P/E ratio, Everest Bank limited. Moreover, it presents the
variable summary and conceptual framework as well as the knowledge gap and
conclusion.
 6

1.6.1 Conceptual review

In this section the researcher provides a critical analysis of the most relevant theories,
from the classical to the modern approaches, also presenting the theoretical concepts of
the studied field, the definition of the main variables, as the main theories and researches
relating the EPS, MPS and P/E of Everest Bank Limited.

Followings are the indicated independent and dependent variable included in the research
topic analyzing the EPS, MPS and P/E of Everest Bank Ltd. The conceptual frame work
interlinks independent and dependent variable as depicted in the figure.

Dependent
Independent Variable Variable

EPS
MPS
P/E

(Figure 2: Conceptual Framework of Relationship between Eps and MPS)

The revenue earned by a company after meeting cost of production, then interest,
depreciation and tax belong to the equity shareholders. This earning by the number of
outstanding equity shares is referred to as EPS (Black, 1980).

Market price per share (MPS) or fair market value of a stock is the price that a stock can
be readily bought or sold in the current market place. In other words, the market price per
share is the "going price" of a share of stock. It is the price at which a share of company
 7

stock can be acquired in the marketplace, such as on a stock exchange. This price varies
throughout the day, based on the level of demand for the stock (Haugan, 1997).

Price earnings ratio is a ratio between market value per share to earnings per share. It is
computed by dividing MPS by EPS and multiplying the result by 100 (Hull, 2009).

1.6.2. Review of previous research

Early studies, such as Graham & Dodd's (1934), established the foundational importance
of EPS as a critical measure of a company's profitability and shareholder value.

The Efficient Market Hypothesis (Fama, 1970) contends that MPS fully incorporates
available information, while behavioral finance perspectives (Shleifer and Vishny, 1997)
explore psychological factors influencing market pricing, providing a theoretical
backdrop for understanding MPS-EPS dynamics.

Research by Ball and Brown (1968) and subsequent empirical studies, like those by
Penman (1987), consistently reveal a positive correlation between EPS growth and MPS,
suggesting that investors respond positively to companies with strong earnings
performance.

The study by Liang et al. (2003) investigates industry-specific factors affecting the MPS-
EPS relationship, recognizing the distinct dynamics in technology sectors compared to
stable, dividend-paying industries.

Tetlock (2007) delves into market sentiment, illustrating its impact on MPS. The study
emphasizes the psychological factors shaping investor decisions and the subsequent
influence on market pricing.

Dechow et al. (1995) explore the influence of accounting practices on EPS reporting. The
study highlights the relevance of adjusted EPS figures and the impact of different
accounting methodologies on market reactions.

Studies by Bernard and Thomas (1989) differentiate between short-term market reactions
to quarterly EPS releases and long-term trends. This perspective underscores the
importance of distinguishing transient market movements from sustainable value
creation.
 8

Leuz et al. (2003) investigate the effects of regulatory changes on EPS reporting and
market valuations. The study sheds light on how alterations in financial regulations can
influence investor interpretation of EPS data.

Building on behavioral finance, Barberis and Thaler (2003) explore cognitive biases
affecting investor decisions and the subsequent impact on MPS. Understanding these
biases provides insights into market anomalies.

Chowdhury et al. (2018) offer a global perspective, analyzing MPS-EPS dynamics in

different markets. Their cross-country study contributes to understanding how cultural,
economic, and regulatory variations shape this relationship.

Factors such as profitability, asset quality, capital adequacy, interest rate environment,
and regulatory dynamics have been identified as determinants of the MPS-EPS
relationship in commercial banks (Altman & Saunders, 1998; Demirgüç-Kunt &
Huizinga, 1999).

Empirical studies by Berger & Bouwman (2009) and Pasiouras & Kosmidou (2007)
have examined how bank-specific and macroeconomic factors influence the MPS-EPS
relationship.

Research on market reactions to earnings announcements provides insights into the

short-term dynamics of the MPS-EPS relationship in commercial banks.

Studies by Brown & Warner (1985) and Ball & Brown (1968) have investigated the
magnitude and persistence of market responses to EPS surprises in the banking sector.

1.7 Research Methodology

The researcher has adopted the following methodology to analyze price to earnings ratio
of Everest Bank Limited.

1.7.1 Research design

The researcher has followed descriptive research design because researcher has studied
and described the data and characteristics related on research topic.

1.7.2 Population and sample

 9

Currently, there are 20 commercial banks in Nepal (NRB, 2023). Out of 20 commercial
bank of Nepal, Everest Bank Limited has been selected as a sample for this report to
study.

1.7.3 Sources of data collection

This study is based on secondary sources of data. Data collection techniques and sources
used in this report are presented below:

 Journals and Articles,

 Annual report,
 Websites
 Text books.

1.7.4 Data presentation and analysis tools

To achieve research objective statistical and Financial tools used in this report are
follows:

a) Presentation Tools:

 Table,
 Figure,
 Bar, Diagram,

b) Financial Tools:

 Earnings per share,

 Price to earnings ratio,
 Market price per share.

c) Statistical Tools:

 Correlation
 Mean
 Median
 SD
 CV
 10

1.8 Limitations of the Study

This study consists of following limitations:

 Everest Bank Ltd. has been selected as a sample for the study of research out of
20 commercial banks in Nepal.
 This research will be based only on secondary data.
 This research has been conducted concentrating only five years’ data from FY-
2075 to 2080.
 Only MPS and EPS variables are taken for research.

1.9 Organization of the Study

The study is organized into three chapters. They are summarized as listed below:

Chapter-I: Introduction

The first chapter includes background, profile of organization, objectives, rationale,

research methodology, limitations, statement of problems, organization of study, review
of Literature.

Chapter-II: Data Presentation and Analysis:

This chapter includes data presentation tools, data analysis tools and results and major
findings of the study.

Chapter-III: Summary, Conclusion end Recommendations:

This chapter includes Summary, conclusion and Recommendations.

Lastly, bibliography and appendices are added at end of this report.

 11

CHAPTER - II

DATA PRESENTATION AND ANALYSIS

2.1 Data Presentation

This chapter consists the presentation of empirical data and analysis them with the help of
various financial and statistical tools. It is the most important part of the report. Data
Presentation refers to the organization of data into tables, graphs or charts, so that logical
and statistical conclusion can be derived from the collected measurement. In this chapter
an attempt has been made to analyze the MPS, EPS & price earnings ratio of five years.
The data for this study is presented in table form and are analyzed with the help of
financial tools.

2.1.1 Market price per share

Market price per share is the current price at which a single share of a company's stock is
traded on the open market, determined by the forces of supply and demand in the
financial markets.

In essence, the market price per share represents the price investors are willing to pay for
a company's stock, while earnings per share reflects the company's profitability on a per-
share basis. The P/E ratio is a key metric for investors assessing a stock's valuation and
growth potential. A high P/E may suggest optimism about future earnings, but it could
also mean the stock is overvalued. Conversely, a low P/E might indicate undervaluation
or lower growth expectations. It's crucial to consider other factors and industry
benchmarks when interpreting P/E.
 12

800
738

Market price per share

700 666 675

600 563

500
439
400

300

200

100

0
2018/19 2019/20 2020/21 2021/22 2022/23

Fiscal Year

Figure 1 : Market price per share of Everest Bank Limited

Figure shows the MPS of Everest Bank Limited where X axis shows the fiscal year and Y
axis shows the Market price per share. In this line diagram MPS is fluctuating over the
period of time. MPS is increasing from fiscal year 2018/19 to 2020/21 and decreased in
2021/22. Then after increased in the year 2022/23.

2.1.2 Earnings per share (EPS)

Earnings per share (EPS) is a financial metric that measures the portion of a company's
profit allocated to each outstanding share of common stock, indicating the company's
profitability on a per-share basis (Brigham & Houston, 2019).
 13

40 38.05

35
31.43
Earnings Per Share (In Rupees) 29.71
30
26.3
25
19.91
20

15

10

0
2018/19 2019/20 2020/21 2021/22 2022/23

Fiscal Year

Figure 2 : Earnings Per Share of Everest Bank Limited

Figure 2 shows the EPS of Everest Bank Limited where X axis shows the fiscal year and
Y axis shows the Earnings Per Share. In this Bar Diagram EPS is decreasing from fiscal
year 2018/19 to 2020/21 and increased in the year 2021/22 and 2022/23.

2.1.3 Price-earnings ratio (P/E Ratio)

The Price earnings ratio (P/E ratio) is displayed as the ratio of a company's share price to
the company's earnings per share. It reflects an organization's potential to make money.
This potential is measured in term of the value paid by equity holder for each stock unit.
Thus it indicates the particular stock is cheaper or costlier than its competitions within the
same industry. P/E ratio is used for valuing companies and to find out whether they are
overvalued or undervalued. The low P/E ratio is a sign of undervalued while a high P/E
ratio is sign of overvalued.
 14

40
37.06
35

30

25 22.72

20 17.91
Price Earnings Ratio

17.5 16.69
15

10

0
2018/19 2019/20 2020/21 2021/22 2022/23

Fiscal Year

Figure 3 : Price Earnings Ratio of Everest Bank Limited

Above Figure shows the P/E ratio of Everest Bank Limited where X axis shows the fiscal
year and Y axis shows the P/E ratio. In this Bar diagram P/E Ratio is fluctuating over the
period of time. P/E ratio is increasing from fiscal year 2018/19 to 2020/21 and decreased
in 2021/22. Then after increased nominally in the year 2022/23.

2.2 Data Analysis

This study is about relationship between EPS and MPS of Everest Bank Limited. The
data are collected from secondary sources i.e. to say annual report of Everest Bank
Limited.
 15

2.2.1 Statistical analysis

Table 2

Statistical Analysis of Everest Bank Limited

Year MPS EPS P/E

2018/19 666 38.05 17.5
2019/20 675 29.71 22.72
2020/21 738 19.91 37.06
2021/22 439 26.3 16.69
2022/23 563 31.43 17.91
Mean 616.2 29.10 22.37
Median 666 29,79 17.91
S.D. 117.26 6.68 8.54
Max. 738 38.05 37.06
Min. 439 19,91 16.69
CV 5.25 4.36 2.62

This study shows that the maximum values of MPS, EPS and P/E ratio of Everest Bank
Ltd. over the five years periods. The maximum value of MPS, EPS and P/E ratio of
Everest Bank Ltd. over five years periods are Rs. 738, Rs. 38.05 and 37.06 respectively.
The minimum value of MPS, EPS and P/E ratio of Everest Bank Ltd. over five years
periods are Rs. 439, Rs. 19.91 and 16.69 respectively. The MPS of Everest Bank Limited
is increasing for first three years i.e. F/Y 2018/19, F/Y 2019/20, F/Y 2020/2021 and in
F/Y 2021/22 MPS is decreased. MPS is started to increase in F/Y 2022/23. The Earning
per share (EPS) throughout the year is decrease in F/Y 2018/19 to 2020/21. Then after
continuously increase in F/Y 2021/22 to 2022/23. The price earnings ratio (P/E ratio)
increasing from F/Y 2018/19 to 2020/21. Then after decrease in F/Y 2021/22 and
increase in F/Y 2022/23.

The mean of MPS, EPS and P/E ratio during the five year are, RS 616.2, 29.10 and 22.37.
The median of MPS, EPS and P/E ratio during the five year are Rs. 666, 29.79 and 17.91.
The standard deviation of MPS, EPS and P/E ratio during the five year are Rs. 117.26,
 16

6.68, 8.54. The maximum value of EPS, MPS, and P/E ratio are Rs. 738, 38.05 and 37.06
respectively. The minimum value of MPS, EPS and P/E ratio are Rs. 439, 19.91 and
16.69 respectively. The Coefficient of variance of MPS, EPS and P/E ratio are 5.25%,
4.36% and 2.62% respectively.

2.2.2 Correlation of MPS, EPS of Everest Bank Limited

Let suppose EPS be 'X' and MPS be 'Y' to calculate the Karl Pearson's correlation
coefficient,

r =N ¿ ¿

Let suppose, EPS be 'X' and MPS be 'Y' to calculate the Karl Pearson's correlation
coefficient.

Table 23

Correlation Coefficient between EPS and MPS of Everest Bank Limited

Fiscal EPS (X) MPS (Y) X2 Y2 XY

Year
2018/19 38.05 666 1447.80 443556 25341.3
2019/20 29.71 675 882.68 455625 20054.3
2020/21 19.91 738 396.41 544644 14693.6
2021/22 26.3 439 691.69 192721 11545.7
2022/23 31.43 563 987.84 316969 17695.1

N=5 ∑X=145.4 ∑Y = 3081 ∑X2=4406.43 ∑Y2 = 1953515 ∑XY = 89329.92

Putting the above value in Karl Pearson's Correlation Coefficient formula (r)

r =N ¿ ¿

5 x 89329.92−145.4 x 3081
r=
√ 5 x 4406.43−21141.16 √5 x 1953515−3816220855225
r =−0.0833
 17

The correlation between MPS and EPS is nominal negative (r= -0.0833). it means that it
shows negative relation between MPS and EPS of Everest bank limited.

2.3. Major Findings

Finding is an important part of the report writing and presentation during the time of the
field of activities in the Everest Bank Ltd. So, on the way of report writing, different fact
has been found which are as follow:

 During five year the maximum, minimum and average MPS of Everest Bank Ltd. are
Rs 738, Rs 439 and 616.2.
 During the five year the maximum, minimum and average EPS of Everest Bank Ltd.
are Rs 38.05, Rs 19.91 and 29.10.
 During the five year the maximum, minimum and average P/E of Everest Bank Ltd
are 37.06, 16.69 and 22.37.
 The MPS is decrease for first three year i.e. F/Y 2018/19, F/Y 2019/20 to F/Y
2020/21. Then decrease at 2021/22 and start to increase in F/Y 2022/23.
 The EPS is decrease in year 2018/19 to 2020/21. Then after continuously increase in
2021/22 to 2022/23.
 The P/E ratio increasing from F/Y 2018/19 to 2020/21. Then after decrease in
2021/22 and increase in 2022/23.
 Correlation between MPS and EPS of Everest Bank Ltd. is -0.0833. It means relation
between MPS on EPS is negative.
 The standard deviation of MPS, EPS and P/E ratio during the five years are 117.26,
6.68 and 8.54 respectively.
 The coefficient of variance of MPS, EPS and P/E ratio during the five years are 5.25,
4.36 and 2.62 percent respectively.
 18

CHAPTER-III

SUMMARY AND CONCLUSION

3.1 Summary

In the preparation of this project work report, an analysis of MPS and EPS of Everest
Bank Ltd. is chosen because it is an important subject or function in regards to investors
and shareholders. To find out the relation between MPS and EPS of related bank is the
main objective of this project work. It includes MPS and EPS of Everest Bank Ltd. as the
sample study which is selected through convenience sampling process out of total
population of commercial bank i.e. 20 Banks.

Here descriptive research design is used and bar diagram, trend lines as well as various
statistical and financial tools were used to analyze the study. A correlation analysis tool is
used as data analysis tools. The collected data and information have been presented by
the help of different tabulation, figures, trend line and formula which shows the MPS and
EPS of Everest Bank Ltd. Limitations of the study are this study is based on the data of
five years duration from F/Y 2018/19 to 2022/23. Only MPS is analyzed to determine the
EPS but there are other many factors that affect the market share.

3.2 Conclusion

After the introduction and analysis of five years data and information of Everest Bank
Ltd. following facts are concluded is found. From the above report MPS and EPS born
are in fluctuation trends i.e. the MPS of Everest Bank Limited is increasing for first three
years and decreased in last 4th years. MPS is started to increase in last year.

The Earning per share throughout the year is decrease in there years. Then after
continuously increase in two fiscal years. The price earnings ratio increasing for 1 st two
years. Then after decreased and increased in last years. There is nominal negative
relationship between MPS and EPS of Everest Bank Limited.
 19

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 21

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Websites

Everest Bank Limited. https://everestbankltd.com/about/

 22

APPENDIX-I

A PROPOSAL ON RELATIONSHIP BETWEEN EARNINGS

PER SHARE AND MARKET PRICE PER SHARE

1.1 Background of the Study

Market price per share (MPS) represents the current price at which a single share of a
company's stock is traded in the open market. It reflects the valuation that investors
assign to ownership in the company at a specific point in time. The determination of MPS
is influenced by various factors such as supply and demand dynamics, investor sentiment,
company performance, and broader market conditions (Bodie, Kane & Marcus, 2018;
Ross, Westerfield & Jordan, 2019).

Earnings per share (EPS) is a financial metric that indicates a company's profitability on a
per-share basis. It is calculated by dividing the company's net income by the total number
of outstanding shares. EPS is a fundamental measure used by investors and analysts to
assess a company's financial performance and profitability over a specific period. It
provides insight into the company's ability to generate profits for each shareholder and is
a key component in various financial analyses (Brigham & Houston, 2019; Horngren et
al., 2017).

Earnings per share (EPS) indicate the return earned per share. This ratio measures the
company's share market value. It points out whether the company has increased or not. It
symbolizes the part of a company's earning, net of taxes and preferred stock dividend that
is apportioned to each share of common stock (Sanchayan, 2017). It refers to the ratio of
the portfolio of the profit after tax of the company for any financial years after tax of the
company for any financial years after payment of preference dividend (Islam khan,
Chaudhary, Adnan, 2014).

The price-earnings ratio (P/E ratio) is a valuation metric that compares a company's
market price per share (MPS) to its earnings per share (EPS). It is calculated by dividing
 23

the market price per share by the earnings per share. The P/E ratio is widely used by
investors to assess the market's perception of a company's growth prospects, profitability,
and risk. A higher P/E ratio typically indicates that investors are willing to pay more for
each dollar of earnings, suggesting expectations of higher future growth (Gitman et al.,
2019; Brealey, Myers & Allen, 2017).

The relationship between market price per share (MPS) and earnings per share (EPS) of
commercial banks is a critical aspect of stock valuation and investor decision-making
within the financial sector. MPS represents the market's valuation of a bank's equity,
reflecting investor expectations, sentiments, and perceptions of the bank's performance
and prospects. On the other hand, EPS provides a measure of a bank's profitability per
outstanding share, serving as a key financial metric for assessing its operational
efficiency and financial health.

Understanding the dynamics of the MPS-EPS relationship is essential for investors,

analysts, and policymakers as it offers insights into the underlying factors driving stock
prices and market valuations of commercial banks. Factors influencing this relationship
include the bank's financial performance, asset quality, capital adequacy, regulatory
environment, macroeconomic conditions, and investor sentiment.

Empirical research in this area has explored the determinants and implications of the
MPS-EPS relationship, shedding light on how changes in earnings performance, market
conditions, and regulatory policies impact stock valuations and investor perceptions
within the banking industry (Altman & Saunders, 1998; Berger & Bouwman, 2009).
Additionally, studies have examined the degree of market efficiency in incorporating EPS
information into MPS, providing insights into the efficiency and transparency of bank
stock markets (Fama, 1970).

By analyzing the MPS-EPS relationship in commercial banks, researchers aim to

contribute to the broader understanding of stock valuation mechanisms, investor
behavior, and market dynamics within the financial sector. This research not only informs
investment strategies and risk management practices but also guides regulatory policies
aimed at promoting market efficiency, stability, and investor protection in banking
markets.
 24

Everest Bank Limited is entered into joint venture agreement with Punjab National Bank.
There are 127 branches including main branch (head office) in Nepal. The main purpose
of Everest Bank Limited is to extend Professional banking services to various sector of
the society in Nepal. EBL providing various facilities such as Remittance, ATM
facilities, Letter of Credit, Foreign Exchange, Fixed Deposit, etc. (Everest Bank, n.d.).

1.2 Problems of the Study

This is a vital issue to show the financial health of the bank. It promotes the interest of
promoters to invest in the competitive market. Therefore, this study will conduct to
answer the following questions:

 What is the Earning per share, market price per share and P/E ratio of Everest
Bank Limited?
 What is the relationship between EPS and MPS of Everest Bank Limited?

1.3 Objective of the Study

The prime objective of the study are as follows:

 To analyze the earning per share, market price per share and P/E ratio of Everest
Bank Limited.
 To analyze the relationship between EPS and MPS of Everest Bank Limited.

1.4 Research Methodology

The researcher will adopt the following methodology to analyze price to earnings ratio of
Everest Bank Limited.

1.4.1 Research Design

The researcher will follow descriptive research design because researcher has studied and
described the data and characteristics related on research topic.

1.4.2 Population and sample

Currently, there are 20 commercial banks in Nepal (NRB, 2023). Out of 20 commercial
bank of Nepal, Everest Bank Limited will be selected as a sample for this report to study.
 25

1.4.3 Sources of data collection

This study will be based on secondary sources of data. Data collection techniques and
sources will be used in this report are presented below:

 Journals and Articles,

 Annual report,
 Websites
 Text books.

1.4.4 Data presentation and Analysis Tools

To achieve research objective statistical and Financial tools will be used in this report are
follows:

a) Presentation Tools:

 Table,
 Figure,
 Bar, Diagram,

b) Financial Tools:

 Earnings per share,

 Price to earnings ratio,
 Market price per share.

c) Statistical Tools:

 Correlation
 Mean
 Median
 SD
 CV

1.5 Limitations of the Study

This study consists of following limitations:

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 Everest Bank Ltd. will be selected as a sample for the study of research out of 20
commercial banks in Nepal.
 This research will be based only on secondary data.
 This research will be conducted concentrating only five year's data from FY-2075
to 2080.
 Only MPS and EPS variables will be taken for research.

1.6 Organization of the Study

The study will be organized into three chapters. They are summarized as listed below:

Chapter-I: Introduction

The first chapter includes background, profile of organization, objectives, rationale,

research methodology, limitations, statement of problems, organization of study, review
of Literature.

Chapter-II: Data Presentation and Analysis:

This chapter includes data presentation tools, data analysis tools and results and major
findings of the study.

Chapter-III: Summary, Conclusion end Recommendations:

This chapter includes Summary, conclusion and Recommendations.

Lastly, bibliography and appendices are added at end of this report.

1.7 Time Allotment

Topic Selection 3 days

Proposal Writing 10 days

Data Collection, Presentation and Analysis 9 days

Preparation of Report 8 days

Total 30 days
Submitted By:
Bina Upadhaya
 27

BBS 4th Year

Aims College, Butwal