Is Muthoot Microfin overvalued or undervalued?

As of 9 May 2025, the valuation grade for Muthoot Microfin has moved from very attractive to very expensive, indicating a significant shift in its perceived value. The company is currently deemed overvalued. Key ratios reveal a PE ratio of -9.84, an EV to EBITDA of 13.03, and a Price to Book Value of 0.78, which highlight the challenges in profitability and valuation metrics.
In comparison to its peers, Muthoot Microfin's valuation stands out unfavorably; for instance, Life Insurance operates at a PE ratio of 12.54 and an EV to EBITDA of 9.89, while Bajaj Finance Ltd. is at a PE of 35.01 and EV to EBITDA of 19.51. The stark contrast in these ratios suggests that Muthoot Microfin is not only overvalued relative to its industry but also struggling with negative earnings. Additionally, the company's stock has underperformed significantly over the past year, declining by 39% compared to a 7.53% gain in the Sensex, reinforcing the notion of its overvaluation.