Faze Three Ltd Valuation Shifts to Fair Amid Strong Market Gains

Valuation Metrics and Recent Changes

Faze Three Ltd’s current price stands at ₹438.00, marking a substantial 20.00% increase on the day, with the stock hitting its daily high at ₹438.00. The 52-week price range spans from ₹318.00 to ₹747.00, indicating considerable volatility over the past year. The company’s price-to-earnings (P/E) ratio now reads 31.45, a figure that has contributed to the recent downgrade in its valuation grade from attractive to fair as of 2 February 2026.

Alongside the P/E ratio, the price-to-book value (P/BV) stands at 2.50, which is moderate but higher than some of its more attractively valued peers. The enterprise value to EBITDA (EV/EBITDA) ratio is 16.70, reflecting a valuation that is neither cheap nor excessively expensive relative to earnings before interest, tax, depreciation, and amortisation.

Peer Comparison Highlights

When compared with its industry peers, Faze Three Ltd’s valuation appears more reasonable. Several competitors in the Garments & Apparels sector are trading at significantly higher multiples. For instance, R&B Denims commands a P/E of 44.18 and an EV/EBITDA of 32.85, while Sumeet Industries is valued at a P/E of 75.78 and EV/EBITDA of 36.06, both categorised as very expensive. SBC Exports and Pashupati Cotsp. also fall into the very expensive category with P/E ratios above 60 and EV/EBITDA multiples exceeding 50.

Conversely, companies such as Sportking India and Mafatlal Industries maintain attractive valuations with P/E ratios near 11 and 10.88 respectively, and EV/EBITDA multiples below 10. Indo Rama Synthetic stands out as very attractive with a P/E of 7.8 and EV/EBITDA of 7.43. This spectrum of valuations places Faze Three Ltd in a middle ground, justifying its fair valuation status.

Financial Performance and Returns

Faze Three Ltd’s return profile has been impressive, especially when benchmarked against the Sensex. Over the past week, the stock has surged 10.94%, significantly outpacing the Sensex’s 2.30% gain. On a one-month basis, the stock rose 6.60% while the Sensex declined by 2.36%. Year-to-date returns stand at 5.61% compared to the Sensex’s negative 1.74%. Over longer periods, the outperformance is even more pronounced: a 12.76% gain over one year versus 8.49% for the Sensex, 53.09% over three years against 37.63%, and a staggering 646.17% over five years compared to 66.63% for the benchmark. The ten-year return of 2223.61% dwarfs the Sensex’s 245.70%, underscoring the stock’s strong growth trajectory.

Profitability and Efficiency Metrics

Despite the valuation shift, Faze Three Ltd’s profitability metrics remain modest. The latest return on capital employed (ROCE) is 7.60%, while return on equity (ROE) is 7.94%. These figures suggest moderate efficiency in generating returns from capital and equity, which may partly explain the cautious stance on valuation. The company currently does not offer a dividend yield, which may deter income-focused investors.

Valuation Grade and Mojo Score Analysis

MarketsMOJO has recently downgraded Faze Three Ltd’s Mojo Grade from Sell to Strong Sell on 2 February 2026, reflecting concerns about the stock’s valuation and growth prospects. The Mojo Score currently stands at 28.0, indicating weak overall fundamentals relative to the sector and market. The Market Cap Grade is 4, suggesting a mid-sized market capitalisation that may limit liquidity and institutional interest.

The downgrade in valuation grade from attractive to fair signals that the stock’s price multiples have expanded, reducing the margin of safety for investors. This shift is consistent with the stock’s strong recent price appreciation, which has pushed the P/E ratio above 30, a level that demands sustained earnings growth to justify.

Sector Context and Market Sentiment

The Garments & Apparels sector has seen mixed valuations, with many companies trading at elevated multiples due to expectations of robust demand recovery and margin expansion. However, rising input costs and global supply chain disruptions pose risks to profitability. Faze Three Ltd’s moderate ROCE and ROE suggest it has yet to fully capitalise on sector tailwinds, which may temper investor enthusiasm despite the stock’s strong price momentum.

Investment Implications

Investors considering Faze Three Ltd should weigh the stock’s impressive historical returns against its current valuation and fundamental profile. The fair valuation rating implies limited upside from current levels unless earnings growth accelerates meaningfully. The stock’s strong relative performance versus the Sensex is encouraging but may already be priced in.

Comparisons with peers reveal that while Faze Three Ltd is not among the cheapest options, it offers a more balanced risk-reward profile than very expensive peers such as Sumeet Industries or Pashupati Cotsp. More attractively valued companies like Indo Rama Synthetic and Sportking India may warrant consideration for those seeking value plays within the sector.

Conclusion

Faze Three Ltd’s transition from an attractive to a fair valuation grade reflects the stock’s recent price appreciation and expanded multiples. While the company’s returns have outpaced the Sensex by a wide margin over multiple time frames, its profitability metrics remain moderate, and the valuation now demands sustained growth to justify current levels.

Investors should approach the stock with caution, considering the strong competition within the Garments & Apparels sector and the availability of more attractively valued peers. The recent downgrade to a Strong Sell Mojo Grade underscores the need for careful analysis before committing fresh capital.

Ultimately, Faze Three Ltd remains a stock with a compelling growth history but faces valuation headwinds that may limit near-term upside. Monitoring earnings trends and sector developments will be crucial for investors seeking to gauge the stock’s future trajectory.

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