Allied Digital Services Ltd: Valuation Shifts Signal Fair Price Amid Sector Challenges

Valuation Metrics and Recent Changes

As of 12 Feb 2026, Allied Digital Services Ltd trades at ₹128.70, down 1.49% from the previous close of ₹130.65. The stock has experienced a steep decline over the past year, with a 48.97% negative return compared to the Sensex’s positive 10.41% gain over the same period. This underperformance has contributed to a recalibration of the company’s valuation grades.

The company’s price-to-earnings (P/E) ratio currently stands at 19.66, a figure that has shifted the valuation grade from attractive to fair. This P/E is moderate when compared to peers such as InfoBeans Technologies (28.03) and Blue Cloud Software (34.09), which are classified as very expensive. Allied Digital’s price-to-book value (P/BV) is 1.19, indicating a valuation close to its book value, which is generally considered reasonable in the sector.

Other valuation multiples include an enterprise value to EBITDA (EV/EBITDA) ratio of 11.64 and an EV to EBIT of 24.71. These figures place Allied Digital in a middle ground relative to competitors, with some peers like Silver Touch exhibiting much higher EV/EBITDA multiples (30.43), signalling more expensive valuations.

Comparative Industry Analysis

Within the Computers - Software & Consulting sector, Allied Digital’s valuation metrics suggest a fair price point, especially when contrasted with companies rated as very expensive or risky. For instance, Sigma Advanced Systems is rated risky with a P/E of 24.74, while Expleo Solutions is considered very attractive with a P/E of 11.66 and EV/EBITDA of 6.73. Allied Digital’s metrics, therefore, position it as neither undervalued nor excessively expensive, but rather fairly valued given its current financial performance and market conditions.

Return on capital employed (ROCE) and return on equity (ROE) are also modest, at 4.75% and 6.56% respectively, which may explain the tempered investor enthusiasm. Dividend yield remains low at 1.16%, offering limited income appeal to shareholders.

Stock Performance Versus Market Benchmarks

Allied Digital’s stock performance has been notably weak relative to the broader market. Year-to-date, the stock has declined by 15.27%, while the Sensex has fallen only 1.16%. Over the past month and week, the stock has dropped 5.16% and 3.67% respectively, whereas the Sensex has posted modest gains of 0.79% and 0.50%. This persistent underperformance has weighed on investor sentiment and contributed to the downgrade in the Mojo Grade from Strong Sell to Sell as of 2 June 2025.

Longer-term returns tell a more nuanced story. Over five and ten years, Allied Digital has delivered impressive cumulative returns of 234.29% and 245.97%, respectively, outperforming the Sensex’s 63.46% and 267.00% over the same periods. This suggests that while recent performance has been disappointing, the company has demonstrated resilience and growth potential over extended horizons.

Mojo Score and Grade Implications

Allied Digital’s current Mojo Score is 34.0, reflecting a Sell rating, an improvement from the previous Strong Sell grade. This upgrade indicates a slight improvement in the company’s outlook, though it remains a cautious recommendation for investors. The Market Cap Grade is 4, signalling a mid-tier market capitalisation status within its sector.

The shift in valuation grade from attractive to fair is significant, as it signals that the stock’s price no longer offers a compelling discount relative to its earnings and book value. Investors should weigh this alongside the company’s modest profitability metrics and recent share price weakness.

Investment Considerations and Outlook

Investors analysing Allied Digital Services Ltd should consider the company’s current valuation in the context of its financial health and sector dynamics. The fair valuation grade suggests that the stock is priced in line with its earnings potential and asset base, but does not offer a significant margin of safety for value investors.

Profitability ratios such as ROCE and ROE remain subdued, which may limit the company’s ability to generate strong returns on invested capital. The dividend yield of 1.16% is modest and unlikely to attract income-focused investors.

Comparisons with peers reveal a mixed landscape, with some companies trading at much higher multiples and others offering more attractive valuations. Allied Digital’s moderate multiples may appeal to investors seeking a balanced risk-reward profile, but the recent share price weakness and downgrade in Mojo Grade warrant caution.

Given the stock’s underperformance relative to the Sensex over the past year and year-to-date, investors should carefully assess whether the current price reflects all known risks and opportunities. The company’s long-term track record of strong returns over five and ten years provides some reassurance, but near-term challenges remain.

Conclusion

Allied Digital Services Ltd’s transition from an attractive to a fair valuation grade reflects a recalibration of market expectations amid recent share price declines and modest profitability. While the stock is no longer considered undervalued, it remains competitively priced within its sector. Investors should weigh the company’s fair valuation against its financial metrics and recent performance trends before making investment decisions.

Careful monitoring of earnings growth, return ratios, and sector developments will be essential to determine if Allied Digital can regain its earlier valuation appeal. Until then, the Sell rating and fair valuation grade suggest a cautious stance is warranted.

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