Valuation Metrics Indicate Attractive Pricing
Saven Tech. trades at a price-to-earnings (PE) ratio of approximately 14.9, which is notably lower than many of its prominent peers such as TCS and Infosys, whose PE ratios exceed 23. This suggests that the market values Saven Tech.’s earnings more conservatively, potentially signalling undervaluation relative to sector leaders. The price-to-book (P/B) ratio stands at 2.29, indicating the stock is priced at just over twice its book value, a moderate premium that aligns with its growth prospects and asset base.
Enterprise value multiples further reinforce this perspective. The EV to EBITDA ratio of 13.6 is below the levels observed in larger peers, which often trade above 15, implying that investors pay less for each unit of operating cash flow generated by Saven Tech. The EV to EBIT ratio of 15.7 also supports this view, suggesting operational earnings are reasonably priced.
Moreover, the PEG ratio, which adjusts the PE ratio for earnings growth, is a compelling 0.66. A PEG below 1 typically indicates that the stock is undervalued relative to its growth rate, making Saven Tech. an attractive proposition for growth-oriented investors. The company’s dividend yield of 3.26% adds an income component that enhances total shareholder returns.
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Strong Returns on Capital and Equity
Saven Tech.’s latest return on capital employed (ROCE) is 17.2%, while return on equity (ROE) stands at 15.4%. These figures indicate efficient utilisation of capital and shareholder funds, respectively, and compare favourably within the sector. Such returns suggest the company is generating solid profits relative to its invested capital, a positive sign for valuation.
However, when examining stock performance, Saven Tech. has underperformed the broader Sensex index over the past year and year-to-date periods, with returns of -17.8% and -16.25% respectively, compared to Sensex gains of 5.3% and 9.1%. This underperformance may reflect market concerns or sector-specific challenges, but it also presents a potential entry point for value investors given the company’s attractive valuation metrics.
Peer Comparison Highlights Relative Attractiveness
Among its peers, Saven Tech. is rated as attractive, contrasting with the fair or expensive valuations assigned to larger IT firms such as Infosys, HCL Technologies, and Tech Mahindra. Notably, some companies in the sector are classified as very expensive or risky, underscoring the relative value proposition Saven Tech. offers. Its EV to EBITDA and PEG ratios are significantly lower than those of many competitors, suggesting the market has not fully priced in its growth potential.
While Wipro is rated very attractive, it trades at a higher PE ratio and PEG ratio than Saven Tech., indicating that Saven Tech. may offer a more compelling valuation relative to growth. This peer context supports the view that Saven Tech. is undervalued or fairly valued rather than overvalued.
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Price Range and Market Sentiment
The current share price of ₹46.03 is closer to the 52-week low of ₹41.91 than the high of ₹59.60, indicating some recent price weakness. Daily trading ranges show modest volatility, with intraday highs and lows between ₹45.09 and ₹46.50. This price behaviour, combined with the company’s solid fundamentals, may suggest a temporary market undervaluation or cautious investor sentiment.
Given the company’s attractive valuation metrics, strong returns on capital, and reasonable dividend yield, the current price level appears to offer a margin of safety for investors seeking exposure to the software and consulting sector.
Conclusion: Saven Tech. Appears Undervalued Relative to Peers and Fundamentals
In summary, Saven Tech.’s valuation ratios, including PE, EV to EBITDA, and PEG, are lower than many of its sector peers, signalling an attractive entry point. Its robust ROCE and ROE figures demonstrate operational efficiency and effective capital use. Despite recent underperformance relative to the Sensex, the company’s fundamentals and dividend yield provide a compelling case for undervaluation rather than overvaluation.
Investors should consider Saven Tech. as a potentially undervalued stock within the Computers - Software & Consulting industry, especially when compared to more expensive peers. However, as with all investments, it is prudent to monitor sector trends and company-specific developments to confirm this valuation thesis over time.
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