Is Mahanagar Gas overvalued or undervalued?

As of 29 January 2025, Mahanagar Gas has moved from an attractive to a very attractive valuation grade, indicating a stronger investment appeal. The company is currently undervalued, with a PE ratio of 12.63, an EV to EBITDA of 7.62, and a PEG ratio of 0.00, suggesting that it is trading at a discount relative to its earnings growth potential. In comparison, GAIL (India) has a PE of 11.9 and an EV to EBITDA of 9.37, while Adani Total Gas is marked as very expensive with a PE of 114.25 and an EV to EBITDA of 67.16.
Mahanagar Gas's strong ROCE of 25.95% and ROE of 17.70% further reinforce its undervaluation, as these figures indicate effective management and profitability. Additionally, the company's recent stock performance has outpaced the Sensex, with a year-to-date return of 8.32% compared to the Sensex's 5.62%, suggesting positive market sentiment towards Mahanagar Gas. Overall, the company's strong fundamentals and favorable peer comparison support the conclusion that it is currently undervalued.