Is Classic Leasing overvalued or undervalued?

3 hours ago

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As of December 4, 2025, Classic Leasing is considered undervalued and attractive, with a PE Ratio of 19.53, an EV to EBIT of 22.08, and a year-to-date return of 47.69%, outperforming the Sensex, and showing favorable comparisons to peers like Bajaj Finance and Bajaj Finserv.

Current Valuation Metrics and Financial Health

Classic Leasing’s price-to-earnings (PE) ratio stands at 19.53, which is moderate when compared to many of its NBFC peers. The company’s enterprise value to EBITDA (EV/EBITDA) ratio is 22.08, indicating a relatively high valuation on an earnings basis. However, the price-to-book (P/B) ratio is negative at -3.25, reflecting a negative book value, which is a concern for traditional valuation methods. Despite this, the company’s price-to-earnings-to-growth (PEG) ratio is notably low at 0.32, suggesting that the stock may be undervalued relative to its earnings growth potential.

Return on capital employed (ROCE) is modest at 7.67%, while return on equity (ROE) is negative, consistent with the negative book value. These figures indicate that while the company is generating some returns on its capital, profitability remains a challenge. The absence of a dividend yield further underscores the company’s focus on reinvestment or restructuring rather than shareholder payouts.

Peer Comparison Highlights

When compared to its peers, Classic Leasing’s valuation appears attractive. For instance, Bajaj Finance and Bajaj Finserv, two heavyweight NBFCs, trade at significantly higher PE ratios of 34.9 and 33.78 respectively, with EV/EBITDA multiples well below Classic Leasing’s but accompanied by much higher PEG ratios, indicating pricier valuations relative to growth. Other companies like Life Insurance and SBI Life Insurance are rated very attractive but have vastly different business models and valuation metrics.

Classic Leasing’s EV/EBITDA multiple is higher than some peers but is balanced by its low PEG ratio, which suggests that investors are paying less for each unit of expected earnings growth. This combination often signals a stock that is undervalued relative to its growth prospects, especially in a sector where growth is a key driver of valuation.

Market Performance and Price Movements

Classic Leasing’s stock price currently trades at ₹41.00, down slightly from the previous close of ₹41.55. The 52-week high was ₹59.22, while the low was ₹23.82, indicating significant volatility over the past year. The stock has delivered a strong year-to-date return of 47.69%, outperforming the Sensex’s 9.12% return over the same period. However, the one-year return is negative at -26.79%, reflecting recent challenges or market sentiment shifts.

Over a longer horizon, Classic Leasing has outperformed the Sensex substantially, with a three-year return of 228% compared to the Sensex’s 35.62%. This strong historical performance suggests that the company has created significant shareholder value over time, despite short-term fluctuations.

Valuation Outlook and Investor Considerations

Given the combination of a moderate PE ratio, low PEG ratio, and attractive valuation grade, Classic Leasing appears to be undervalued relative to its growth prospects and peer group. The negative book value and negative ROE are cautionary signals, but these are offset by the company’s improving fundamentals and strong momentum in the stock price over the medium term.

Investors should weigh the risks associated with the company’s financial structure against the potential for earnings growth and market recovery. The stock’s recent correction and attractive valuation grade suggest a buying opportunity for those with a medium to long-term investment horizon.

Conclusion: Is Classic Leasing Overvalued or Undervalued?

In summary, Classic Leasing’s valuation metrics and recent upgrade from risky to attractive suggest that the stock is currently undervalued. Its PE ratio is reasonable compared to peers, and the low PEG ratio indicates that the market is not fully pricing in its growth potential. While the negative book value and ROE present risks, the company’s strong historical returns and improving fundamentals provide a compelling case for investors seeking exposure to the NBFC sector.

Potential investors should consider Classic Leasing as a value opportunity, particularly if they are comfortable with the sector’s inherent risks and volatility. The stock’s recent price correction and attractive valuation grade make it a candidate for further analysis and possible inclusion in a diversified portfolio.

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