Quality Assessment: Robust Fundamentals Amidst Flat Quarterly Performance
Bajaj Finance continues to demonstrate strong long-term fundamental quality, maintaining an average Return on Equity (ROE) of 18.15%, which underscores its efficient capital utilisation. The company’s operating profit has grown at an impressive annualised rate of 27.93%, reflecting consistent operational strength over recent years. Despite a flat financial performance in Q3 FY25-26, with the quarterly Earnings Per Share (EPS) at a low of ₹6.40, the firm’s underlying fundamentals remain resilient.
Institutional investors hold a significant 36.44% stake in the company, indicating confidence from sophisticated market participants who typically conduct rigorous due diligence. Bajaj Finance is ranked among the top 1% of all 4,000 stocks rated by MarketsMojo, highlighting its superior quality relative to peers in the Non-Banking Financial Company (NBFC) sector.
Valuation: Premium Pricing Reflects Market Leadership and Growth Prospects
The stock trades at a Price to Book (P/B) ratio of 6.2, which is considered very expensive compared to sector averages. This premium valuation is supported by the company’s dominant market position, with a market capitalisation of ₹6,42,720 crores, making it the largest entity in the NBFC sector and representing 11.11% of the entire sector’s market cap. Its annual sales of ₹79,373.52 crores account for 3.21% of the industry, further cementing its leadership.
While the Price to Earnings Growth (PEG) ratio stands at 2.6, indicating that the stock’s price growth is outpacing earnings growth, the market has rewarded Bajaj Finance with a 22.89% return over the past year, outperforming the BSE500 index and the Sensex, which returned 10.60% and 2.15% respectively over comparable periods. This suggests that investors are willing to pay a premium for the company’s growth potential and market dominance.
Financial Trend: Mixed Signals with Long-Term Growth but Recent Flat Results
Although the latest quarterly results were flat, the company’s long-term financial trajectory remains positive. Over the last five years, Bajaj Finance has delivered a remarkable 91.52% return, significantly outpacing the Sensex’s 67.42% gain. Over a decade, the stock has generated an extraordinary 1,651.09% return, underscoring its capacity to create shareholder value over extended periods.
However, the flat Q3 FY25-26 results and the EPS dip to ₹6.40 highlight near-term challenges. Profit growth over the past year was 14.1%, which, while respectable, lags behind the stock’s price appreciation. Investors should monitor upcoming earnings releases closely to assess whether the company can sustain its growth momentum.
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Technical Analysis: Upgrade Driven by Bullish Momentum Across Multiple Indicators
The upgrade to a Buy rating was primarily triggered by a significant improvement in the technical grade, which shifted from mildly bullish to bullish. Key technical indicators underpinning this upgrade include the Moving Average Convergence Divergence (MACD), which is bullish on both weekly and monthly charts, signalling strong upward momentum.
Bollinger Bands also indicate bullish trends on weekly and monthly timeframes, suggesting that the stock price is trending upwards with healthy volatility. Daily moving averages confirm this positive momentum, reinforcing the technical strength of the stock.
However, some mixed signals remain. The Know Sure Thing (KST) indicator is bearish on the weekly chart but bullish monthly, while the Dow Theory shows mildly bullish weekly trends but mildly bearish monthly trends. On-Balance Volume (OBV) lacks a clear trend weekly and is mildly bearish monthly, indicating some caution among volume traders.
Despite these nuances, the overall technical picture is positive, supporting the upgrade and signalling potential for further price appreciation. The stock closed at ₹1,031.05 on 24 Feb 2026, marginally up 0.18% from the previous close of ₹1,029.15, with a day’s high of ₹1,045.90 and low of ₹1,029.00. The 52-week high stands at ₹1,102.45, while the low is ₹810.21, indicating a strong recovery and upward trend over the year.
Market Performance: Consistent Outperformance Against Benchmarks
Bajaj Finance has consistently outperformed the Sensex and broader market indices across multiple time horizons. Over the past week, the stock gained 1.80% compared to the Sensex’s 0.02%. Over one month, it surged 11.12%, vastly outpacing the Sensex’s 2.15% gain. Year-to-date, the stock is up 4.50%, while the Sensex has declined 2.26%.
Longer-term returns are even more impressive, with a three-year return of 66.10% versus the Sensex’s 39.74%, and a five-year return of 91.52% compared to 67.42% for the benchmark. These figures highlight Bajaj Finance’s ability to deliver superior returns consistently, reinforcing its status as a market leader in the NBFC sector.
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Risks and Considerations: Valuation and Near-Term Earnings Pressure
Despite the positive outlook, investors should be mindful of certain risks. The company’s valuation remains stretched, with a P/B ratio of 6.2 and a PEG ratio of 2.6, indicating that the stock price is priced for high growth. Any slowdown in earnings growth or adverse macroeconomic developments could pressure the stock.
The recent flat quarterly results and the EPS low of ₹6.40 highlight potential near-term earnings volatility. Additionally, some technical indicators such as the weekly KST and monthly OBV show bearish tendencies, suggesting that caution is warranted in the short term.
Nonetheless, Bajaj Finance’s dominant market position, strong institutional backing, and consistent long-term performance provide a solid foundation for investors willing to accept valuation premiums for quality and growth.
Conclusion: Upgrade Reflects Balanced View of Strengths and Challenges
The upgrade of Bajaj Finance Ltd from Hold to Buy by MarketsMojo on 23 Feb 2026 is a reflection of the company’s improved technical momentum combined with its robust fundamental profile. While near-term earnings have shown signs of stagnation, the long-term growth trajectory, market leadership, and strong institutional interest justify a positive investment stance.
Investors should weigh the premium valuation against the company’s proven ability to outperform benchmarks and deliver sustained returns. The bullish technical signals provide additional confidence in the stock’s potential to continue its upward trend, making it a compelling buy in the NBFC sector.
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