Home First Finance Company India Ltd Valuation Shifts to Expensive Amid Market Rally

Valuation Metrics Reflect Elevated Pricing

As of the latest assessment dated 27 Jan 2026, Home First Finance’s P/E ratio stands at 23.32, a significant premium compared to its peers. For context, PNB Housing Finance and Can Fin Homes, two prominent competitors, trade at more moderate P/E ratios of 9.67 and 12.27 respectively. Even within the broader housing finance universe, companies such as Aptus Value Housing and Sammaan Capital maintain more attractive valuations with P/E ratios of 15.43 and 9.07.

The company’s price-to-book value ratio of 2.88 further underscores the premium investors are currently willing to pay. This contrasts with the sector’s average, where many firms trade closer to or below a P/BV of 2.0, signalling that Home First’s shares are priced at a higher multiple of their net asset value.

Enterprise Value Multiples and Growth Expectations

Examining enterprise value (EV) multiples, Home First’s EV to EBITDA ratio is 13.73, again elevated relative to peers such as PNB Housing (10.68) and Sammaan Capital (8.06). The EV to EBIT ratio of 13.91 aligns closely with the EV to EBITDA, reflecting consistent valuation across earnings metrics.

The PEG ratio, which adjusts the P/E for earnings growth, is 1.26 for Home First Finance. While this suggests moderate growth expectations, it is notably higher than the PEG ratios of many peers, including PNB Housing (0.50) and Aptus Value Housing (0.63). This indicates that the market is pricing in relatively stronger growth prospects for Home First, though at a premium that may limit upside potential if growth disappoints.

Financial Performance and Returns

Despite the premium valuation, Home First Finance delivers respectable returns on capital. The latest return on capital employed (ROCE) is 11.14%, and return on equity (ROE) stands at 12.35%. These figures are competitive within the housing finance sector, reflecting efficient capital utilisation and profitability.

Dividend yield remains modest at 0.33%, which is typical for growth-oriented financial companies reinvesting earnings to fuel expansion.

Price Movement and Market Capitalisation

The stock price has shown resilience, closing at ₹1,112.40 on 27 Jan 2026, up 5.97% on the day from a previous close of ₹1,049.75. The 52-week trading range spans from ₹838.65 to ₹1,518.80, indicating significant volatility but also a strong recovery from lows.

Market capitalisation grading remains moderate at 3, reflecting a mid-sized company stature within the sector.

Relative Performance Against Sensex

Home First Finance has outperformed the benchmark Sensex over multiple time horizons. Over the past year, the stock returned 11.95%, nearly doubling the Sensex’s 6.56% gain. Over three years, the stock’s cumulative return of 47.45% comfortably exceeds the Sensex’s 33.80% rise. This outperformance highlights the company’s ability to generate shareholder value despite the recent valuation premium.

Shift in Rating and Market Sentiment

Reflecting the valuation shift, MarketsMOJO downgraded Home First Finance’s mojo grade from Buy to Hold on 24 Nov 2025. The current mojo score stands at 50.0, signalling a neutral stance. This downgrade is primarily driven by the transition of the valuation grade from fair to expensive, suggesting that the stock’s price appreciation has outpaced underlying fundamentals to some extent.

Investors should note that while the company’s operational metrics remain solid, the elevated multiples imply limited margin for error. Any slowdown in growth or adverse macroeconomic developments could weigh on the stock’s performance.

Peer Comparison Highlights Valuation Disparities

Within the housing finance sector, valuation disparities are pronounced. Aavas Financiers, for example, is classified as very expensive with a P/E of 23.84 and EV to EBITDA of 15.03, slightly higher than Home First. Conversely, companies like Repco Home Finance and Sammaan Capital are deemed attractive, trading at P/E ratios of 5.38 and 9.07 respectively, with lower EV multiples and PEG ratios.

This divergence underscores the importance of selective stock picking in the sector, balancing growth prospects against valuation risks.

Investment Implications and Outlook

For investors considering Home First Finance, the current valuation demands a cautious approach. The company’s strong fundamentals and consistent growth record justify a premium to some degree, but the recent rating downgrade signals that the stock may be fully priced or slightly overvalued at current levels.

Long-term investors should weigh the company’s robust returns on capital and market outperformance against the risk of valuation compression. Monitoring quarterly earnings and sector developments will be critical to reassessing the stock’s attractiveness.

Conclusion: Valuation Premium Warrants Prudence

Home First Finance Company India Ltd’s shift from fair to expensive valuation territory marks a critical juncture for investors. While the company’s operational metrics and market performance remain commendable, the elevated P/E and P/BV ratios relative to peers and historical averages suggest that the stock’s price now incorporates significant growth expectations.

Investors should carefully consider whether the premium valuation is justified by future earnings growth and maintain vigilance for any signs of deceleration. Diversification across housing finance stocks with more attractive valuations may offer a prudent strategy in the current market environment.

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