Is Paul Merchants overvalued or undervalued?

As of 14 August 2025, the valuation grade for Paul Merchants has moved from expensive to very expensive, indicating a significant deterioration in its valuation appeal. The company is currently deemed overvalued, with a PE ratio of 37.15, an EV to EBIT of 10.56, and an EV to EBITDA of 8.66. In comparison, notable peers such as Life Insurance exhibit a much more attractive PE ratio of 11.53 and Bajaj Finance has a PE of 30.73, both highlighting the disparity in valuation metrics.
The company's financial performance shows a ROCE of 4.00% and a ROE of 1.19%, which are relatively low compared to industry standards. Furthermore, while Paul Merchants has shown a positive stock return of 2.55% over the past week, its year-to-date performance is down by 19.05%, contrasting sharply with the Sensex's gain of 3.15% in the same period. This combination of high valuation ratios and underwhelming financial performance suggests that Paul Merchants is not a compelling investment at its current price of 765.00.