Valuation Metrics and What They Indicate
The Invest.Trust currently trades at a price-to-earnings (PE) ratio of approximately 29.1, which is relatively high compared to many of its NBFC peers. While a high PE ratio can sometimes indicate strong growth expectations, it also raises concerns about potential overvaluation if earnings growth does not materialise as anticipated. Interestingly, the price-to-book (P/B) value stands at 0.88, suggesting that the stock is trading below its book value, which could be a sign of undervaluation from a balance sheet perspective.
Other valuation multiples such as EV to EBIT (11.89) and EV to EBITDA (10.25) are moderate, indicating that the enterprise value relative to earnings before interest and taxes or depreciation is not excessively stretched. However, the EV to capital employed ratio is notably low at 0.90, which may reflect efficient capital utilisation or conservative market pricing.
Return metrics reveal a mixed picture. The latest return on capital employed (ROCE) is 7.6%, while return on equity (ROE) is a modest 3.01%. These returns are relatively low for a financial services company, which may justify the cautious stance of some investors despite the stock’s valuation.
Patience pays off here! This Micro Cap from Fertilizers sector has delivered steady gains quarter after quarter. Now proudly part of our Reliable Performers list.
- - New Reliable Performer
- - Steady quarterly gains
- - Fertilizers consistency
Peer Comparison: Contextualising The Invest.Trust’s Valuation
When compared with its peers, The Invest.Trust’s valuation appears expensive but not excessively so. For instance, Bajaj Finance and Jio Financial are classified as very expensive with PE ratios well above 30 and EV to EBITDA multiples significantly higher than The Invest.Trust. Conversely, companies like Life Insurance and SBI Life Insurance are considered very attractive with much lower PE ratios, indicating better value propositions in those segments.
It is important to note that some peers with higher valuations also exhibit stronger growth metrics and returns, which may justify their premium pricing. The Invest.Trust’s PEG ratio is zero, which could indicate a lack of meaningful earnings growth projections, further complicating the valuation picture.
Market Performance and Price Movements
The stock’s current price is ₹121.55, close to its recent trading range low of ₹112.75 over the past 52 weeks, and significantly below its 52-week high of ₹217. This suggests that the market has already priced in some degree of caution or negative sentiment. The stock’s returns have underperformed the Sensex over multiple time horizons, including a year-to-date decline of nearly 38% compared to the Sensex’s positive return of 8.9%.
Such underperformance may reflect concerns about the company’s growth prospects, profitability, or broader sector challenges. However, the stock’s relative stability in the short term, with only a minor weekly decline, indicates some resilience amid market volatility.
Considering The Invest.Trust? Wait! SwitchER has found potentially better options in Non Banking Financial Company (NBFC) and beyond. Compare this Microcap with top-rated alternatives now!
- - Better options discovered
- - Non Banking Financial Company (NBFC) + beyond scope
- - Top-rated alternatives ready
Is The Invest.Trust Overvalued or Undervalued?
Taking all factors into account, The Invest.Trust currently appears to be on the expensive side based on its valuation grade shift and PE ratio relative to its earnings growth potential. The low ROE and ROCE figures suggest that the company is not generating returns that fully justify its current market price. However, the sub-1 P/B ratio and moderate EV multiples indicate that the stock is not grossly overvalued from a book value or enterprise value perspective.
Investors should also consider the company’s subdued market performance relative to the broader Sensex, which signals underlying challenges or market scepticism. While the stock is not deeply undervalued, it may offer value for investors who believe in a turnaround or improved profitability in the medium term. Conversely, those seeking growth or higher returns might find better opportunities among peers with more attractive valuations and stronger fundamentals.
In conclusion, The Invest.Trust is currently better characterised as expensive rather than undervalued, with valuation metrics and returns that warrant cautious scrutiny. Prospective investors should weigh these factors carefully against their risk appetite and investment horizon.
Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →
