Bajaj Finance downgraded to 'Hold' by MarketsMOJO due to sideways trend and expensive valuation

Bajaj Finance, a leading non-banking financial company (NBFC) in India, has recently been downgraded to a 'Hold' by MarketsMOJO on July 1, 2024. This decision was based on the company's current performance and future potential.
Despite having a strong long-term fundamental strength with an average Return on Equity (ROE) of 17.16%, Bajaj Finance's technical trend is currently sideways, indicating no clear price momentum. The company has also underperformed the market in the last year, with a return of only 1.61% compared to the market's 37.64%.

However, Bajaj Finance has shown healthy long-term growth with an annual growth rate of 27.11% in operating profit. In the last quarter of March 2024, the company declared very positive results with a growth in operating profit of 31.64%. Bajaj Finance has also declared positive results for the last 11 consecutive quarters, showcasing its consistent performance.

With a high institutional holding of 34.96%, Bajaj Finance has the support of investors with better capability and resources to analyze the company's fundamentals. It is also the second biggest company in the finance sector, with a market cap of Rs 4,40,840 crore and annual sales of Rs 54,965.84 crore, making up 2.65% of the industry.

However, with a ROE of 18.8 and a price to book value of 5.9, Bajaj Finance is currently trading at a premium compared to its historical valuations. Its PEG ratio of 1.4 also suggests an expensive valuation. Despite a 25.6% rise in profits in the past year, the stock has only generated a return of 1.61%, indicating a potential overvaluation.

In conclusion, while Bajaj Finance has a strong long-term fundamental strength and consistent performance, its current technical trend and expensive valuation suggest a 'Hold' for now. Investors should keep an eye on the company's future performance and market trends before making any investment decisions.