Is AU Small Finance overvalued or undervalued?

As of 14 July 2025, the valuation grade for AU Small Finance has moved from very expensive to expensive, indicating a slight improvement in its valuation perspective. The company is currently considered overvalued. Key ratios include a PE ratio of 28.45, a Price to Book Value of 3.52, and a PEG ratio of 1.55, which suggest that the stock is priced high relative to its earnings and growth potential.
In comparison to its peers, HDFC Bank has a PE ratio of 22.58 and ICICI Bank has a PE ratio of 21.5, both of which are lower than AU Small Finance's current valuation. This further supports the conclusion that AU Small Finance is overvalued in its market segment. Notably, the company's stock has outperformed the Sensex year-to-date, with a return of 44.07% compared to the Sensex's 5.27%, which may reflect investor optimism despite the high valuation metrics.