Is Morarka Finance overvalued or undervalued?

As of 17 July 2025, Morarka Finance's valuation grade has moved from fair to very expensive, indicating a significant shift in its market perception. The company is currently considered overvalued, especially given its high PE ratio of 43.97 and EV to EBITDA ratio of 39.94, which are substantially higher than its peers. For instance, Life Insurance has a PE ratio of 12.12, while Bajaj Finance stands at 34.51, both suggesting that Morarka Finance's valuation is not justified by its earnings potential.
Additionally, the company's ROE is a mere 1.35%, which raises concerns about its profitability relative to its high market valuation. While the dividend yield of 4.76% may attract some investors, it does not compensate for the lackluster return on capital employed of 2.05%. Recent stock performance shows a 10% return over the past week, contrasting with a slight decline in the Sensex, but this short-term gain does not alter the overall valuation picture.