Bajaj Finserv downgraded to 'Hold' rating by MarketsMOJO due to expensive valuation and underperformance

Bajaj Finserv, a leading finance and NBFC company in India, has recently been downgraded to a 'Hold' rating by MarketsMOJO on April 30, 2024. This decision was based on the company's strong long-term fundamental strength, with an average Return on Equity (ROE) of 12.39%.
Bajaj Finserv has shown healthy long-term growth, with its Net Sales growing at an annual rate of 20.97% and Operating profit at 22.24%. The company has also declared positive results for the last 9 consecutive quarters, with its Profit After Tax (HY) growing at 20.42% and PBDIT (Q) at its highest at Rs 10,932.54 crore. Additionally, its PBT LESS OI (Q) is also at its highest at Rs 5,525.45 crore.

Technically, the stock is currently in a mildly bullish range, with a key technical factor - KST - being bullish since April 26, 2024. The majority shareholders of Bajaj Finserv are its promoters.

However, with an ROE of 13.5, the stock is currently trading at an expensive valuation with a Price to Book Value of 4.2. It is also trading at a premium compared to its average historical valuations. In the past year, while the stock has generated a return of 18.06%, its profits have only risen by 27%, resulting in a PEG ratio of 1.2.

In the last year, Bajaj Finserv has underperformed the market, with a return of 18.06%, much lower than the market (BSE 500) returns of 36.89%. While the company has shown strong fundamental strength and positive results, its expensive valuation and underperformance in the market may be a cause for concern for investors. Therefore, MarketsMOJO has downgraded the stock to a 'Hold' rating.