Valuation Metrics and Financial Ratios
IL&FS Inv.Manag. currently trades at a price-to-earnings (PE) ratio of approximately 20.2, which is moderate compared to many peers in the capital markets sector. Its price-to-book (P/B) value stands at 1.3, suggesting the stock is priced slightly above its net asset value but not excessively so. The enterprise value to EBITDA (EV/EBITDA) ratio is notably negative, reflecting some accounting or operational nuances, but the EV to capital employed ratio is a reasonable 1.88, indicating efficient use of capital relative to its valuation.
The company’s PEG ratio, which adjusts the PE ratio for earnings growth, is a low 0.64. This figure typically signals undervaluation, as it implies the stock price does not fully reflect expected earnings growth. Additionally, IL&FS Inv.Manag. offers a robust dividend yield of 9.22%, which is attractive for income-focused investors seeking steady returns in a volatile market.
Profitability and Returns
Despite these positive valuation indicators, the company’s return on capital employed (ROCE) is negative at -5.49%, suggesting challenges in generating profits from its capital base. However, the return on equity (ROE) is a modest 6.41%, indicating some level of shareholder value creation. These mixed profitability metrics warrant cautious optimism, as improving operational efficiency could enhance future returns.
Our current monthly pick, this Mid Cap from Automobile Two & Three Wheelers, survived rigorous evaluation against dozens of contenders. See why experts are backing this one!
- - Rigorous evaluation cleared
- - Expert-backed selection
- - Mid Cap conviction pick
Peer Comparison and Relative Valuation
When compared to its peers, IL&FS Inv.Manag. stands out as very attractively valued. For instance, Bajaj Finance and Bajaj Finserv trade at significantly higher PE ratios of over 33, with PEG ratios well above 1.8, indicating expensive valuations relative to growth. Life Insurance companies like SBI Life Insurance and HDFC Life Insurance, while also attractive in some cases, have much higher PE and EV/EBITDA multiples, reflecting stronger market confidence or growth expectations.
IL&FS Inv.Manag.’s PEG ratio of 0.64 is notably lower than many peers, suggesting the market may be undervaluing its growth prospects. The company’s dividend yield also surpasses many competitors, adding to its appeal for investors seeking income alongside capital appreciation.
Recent Market Performance and Price Trends
The stock’s recent price action has been mixed. Over the past week, IL&FS Inv.Manag. declined by 7.74%, underperforming the Sensex, which gained 0.79% in the same period. However, over the last month, the stock rebounded with a 7.5% gain, slightly outperforming the benchmark. Year-to-date and one-year returns remain negative, reflecting broader sectoral or company-specific headwinds, while the five-year return of 126.81% comfortably outpaces the Sensex’s 94.23% gain, highlighting strong long-term performance.
The stock currently trades near ₹8.46, closer to its 52-week low of ₹7.01 than its high of ₹12.85, indicating room for upside if market sentiment improves or fundamentals strengthen.
IL&FS Inv.Manag. or something better? Our SwitchER feature analyzes this Microcap Capital Markets stock and recommends superior alternatives based on fundamentals, momentum, and value!
- - SwitchER analysis complete
- - Superior alternatives found
- - Multi-parameter evaluation
Conclusion: Undervalued with Caveats
Taking all factors into account, IL&FS Inv.Manag. appears to be undervalued at present. Its very attractive valuation grade, low PEG ratio, and high dividend yield suggest the stock is priced below its intrinsic worth relative to growth potential and income generation. The company’s valuation multiples are modest compared to many peers, reinforcing this view.
However, investors should be mindful of the negative ROCE and recent price volatility, which indicate operational challenges and market uncertainty. The stock’s underperformance relative to the Sensex over the short and medium term also suggests caution.
For investors with a higher risk tolerance and a long-term horizon, IL&FS Inv.Manag. offers an appealing entry point, especially if the company can improve profitability metrics. Those seeking safer or more stable growth might consider peer alternatives with stronger returns on capital and steadier price performance.
Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →
