Is Equitas Sma. Fin overvalued or undervalued?

As of 1 July 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 considered overvalued, with a PE ratio of 53.85, a Price to Book Value of 1.30, and a PEG ratio of 0.00. In comparison, peers such as HDFC Bank and ICICI Bank have PE ratios of 22.91 and 21.64, respectively, highlighting a significant premium at which Equitas is trading.
Despite a recent stock performance that outpaced the Sensex over the past month, with a return of 9.1% compared to the Sensex's 2.76%, the fundamental metrics suggest that Equitas Small Finance is not justified at its current valuation. The company's return on equity stands at a mere 2.42%, further emphasizing the disconnect between its stock price and financial performance relative to its peers. Overall, the analysis indicates that Equitas Small Finance is overvalued in its current market position.