Understanding the Current Rating
The 'Hold' rating assigned to Firstsource Solutions Ltd indicates a cautious stance for investors. It suggests that while the stock has certain strengths, it may not currently offer the compelling upside potential that would warrant a 'Buy' recommendation. Investors are advised to maintain their existing positions rather than aggressively accumulate or divest. This balanced rating reflects a nuanced assessment of the company’s quality, valuation, financial trend, and technical outlook.
Quality Assessment
As of 21 January 2026, Firstsource Solutions Ltd maintains a good quality grade. The company demonstrates a strong ability to service its debt, with a low Debt to EBITDA ratio of 1.50 times, signalling prudent financial management and manageable leverage. Operating profit has grown at an annualised rate of 15.25%, underscoring consistent operational efficiency and growth momentum. Additionally, the company has declared positive results for three consecutive quarters, with the latest quarter showing operating cash flow at a peak of ₹503.63 crores and net sales reaching ₹2,312.22 crores. These figures highlight robust business performance and operational stability.
Valuation Perspective
The valuation grade for Firstsource Solutions Ltd is currently rated as very attractive. The stock trades at a discount relative to its peers’ historical valuations, supported by a Return on Capital Employed (ROCE) of 15.4% and an Enterprise Value to Capital Employed ratio of 3.8. Despite the stock’s 13.39% negative return over the past year, the company’s profits have risen by 23.4%, resulting in a Price/Earnings to Growth (PEG) ratio of 1.5. This suggests that the market may be undervaluing the company’s earnings growth potential, presenting a valuation opportunity for discerning investors.
Financial Trend Analysis
The financial trend for Firstsource Solutions Ltd is rated as very positive. The company’s net profit growth of 6.01% in the most recent quarter, coupled with sustained positive quarterly results, indicates a healthy upward trajectory. Operating profit to interest coverage stands at a strong 8.79 times, reflecting the company’s capacity to comfortably meet interest obligations. Institutional investors hold a significant 34.39% stake, which has increased by 0.51% over the previous quarter, signalling confidence from sophisticated market participants who typically conduct thorough fundamental analysis.
Technical Outlook
On the technical front, the stock currently holds a bearish grade. Recent price movements show a decline of 1.07% on the day, with a one-month drop of 9.50% and a six-month decline of 11.40%. Year-to-date, the stock has fallen 6.64%, reflecting short-term selling pressure and subdued market sentiment. This technical weakness tempers the otherwise positive fundamental backdrop, suggesting that investors should be cautious and monitor price action closely before making fresh commitments.
Here’s How the Stock Looks Today
As of 21 January 2026, Firstsource Solutions Ltd presents a mixed but fundamentally sound profile. The company’s strong operational metrics and attractive valuation contrast with recent price softness and technical challenges. Investors should weigh the company’s solid financial health and growth prospects against the current market sentiment and price trends. The 'Hold' rating reflects this balanced view, advising investors to maintain positions while awaiting clearer technical signals or further fundamental developments.
Investment Implications
For investors, the 'Hold' rating on Firstsource Solutions Ltd suggests a prudent approach. The company’s strong fundamentals and attractive valuation may offer upside potential over the medium to long term, but the current technical weakness and recent negative returns warrant caution. Investors already holding the stock might consider retaining their positions, while new investors could wait for signs of technical recovery or further fundamental confirmation before entering.
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Sector and Market Context
Firstsource Solutions Ltd operates within the Commercial Services & Supplies sector, a space characterised by competitive pressures and evolving client demands. The company’s small-cap status means it is more susceptible to market volatility compared to larger peers. However, its strong institutional backing and consistent profit growth provide a degree of resilience. The broader market environment remains cautious, with investors favouring companies demonstrating clear earnings visibility and stable technical trends.
Summary of Key Metrics as of 21 January 2026
To summarise, the stock’s key metrics include a Mojo Score of 58.0, reflecting the 'Hold' grade. The company’s operating profit growth rate of 15.25% and net profit growth of 6.01% underpin its positive financial trend. Valuation metrics such as ROCE at 15.4% and an EV/Capital Employed ratio of 3.8 highlight the stock’s relative attractiveness. Despite these positives, the technical grade remains bearish, with recent price declines signalling caution.
Conclusion
Firstsource Solutions Ltd’s current 'Hold' rating by MarketsMOJO, updated on 29 December 2025, is a reflection of its solid fundamental base tempered by recent technical weakness. Investors should consider this rating as guidance to maintain existing holdings while monitoring market developments closely. The company’s attractive valuation and positive financial trends offer potential for future appreciation, but the prevailing market conditions suggest a measured approach is advisable at this stage.
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