Is Equitas Sma. Fin overvalued or undervalued?

As of 23 June 2025, the valuation grade for Equitas Small Finance has moved from fair to expensive, indicating a shift in perception regarding its market value. The company is currently deemed overvalued based on its high PE ratio of 52.47, a price-to-book value of 1.27, and a PEG ratio of 0.00, which suggests that the stock price does not reflect the company's growth potential. In comparison, HDFC Bank and ICICI Bank, both categorized as expensive, have significantly lower PE ratios of 22.18 and 21.45, respectively, highlighting the disparity in valuation among peers.
The company's return metrics also reflect a mixed performance, with a year-to-date return of 5.47%, slightly outperforming the Sensex's 4.81%. However, the one-year return of -35.04% starkly contrasts with the Sensex's positive return of 6.07%, further emphasizing the challenges Equitas Small Finance faces. Overall, the combination of high valuation ratios and poor relative performance suggests that the company is overvalued in the current market environment.