Is Zeal Global Serv overvalued or undervalued?

Valuation Metrics Indicate Fair Pricing

As of 1 December 2025, Zeal Global Serv’s valuation grade was revised to fair from previously expensive. This adjustment reflects the company’s current price-to-earnings (PE) ratio of approximately 9.2, which is notably lower than many of its peers in the transport services sector. For context, competitors such as Container Corporation and Blue Dart Express trade at significantly higher PE multiples, often exceeding 30 or more, indicating that Zeal Global Serv is priced more conservatively relative to earnings.

Further supporting this fair valuation stance are the company’s enterprise value to EBITDA (EV/EBITDA) ratio of around 7.2 and a price-to-book value of 1.6. These figures suggest that the market is valuing Zeal Global Serv at a reasonable premium over its book value and operating cash flow, consistent with a company that is neither undervalued nor overpriced.

Strong Returns on Capital Highlight Operational Efficiency

Zeal Global Serv’s latest return on capital employed (ROCE) stands at 15.45%, while return on equity (ROE) is an impressive 17.35%. These metrics underscore the company’s ability to generate solid returns from its invested capital and shareholder equity, which is a positive sign for long-term investors. Such returns are competitive within the transport services industry and justify the current valuation level.

Market Performance and Price Trends

Despite the fair valuation, the stock has experienced significant price pressure over the past year, with a year-to-date return of approximately -43% and a one-year decline exceeding 46%. This underperformance contrasts sharply with the broader Sensex, which has delivered positive returns over the same periods. The stock’s 52-week high was ₹200, while it currently trades near its 52-week low of ₹98.30, reflecting investor caution amid broader market volatility and sector-specific challenges.

Peer Comparison Reinforces Fair Valuation

When compared with its industry peers, Zeal Global Serv’s valuation metrics stand out as more reasonable. Several competitors are classified as expensive or very expensive, with PE ratios and EV/EBITDA multiples often two to three times higher. For example, Container Corporation trades at a PE ratio near 29 and an EV/EBITDA of 18.5, while Delhivery’s valuation metrics are even more stretched. This disparity suggests that Zeal Global Serv offers a more attractive entry point for investors prioritising value over growth at any cost.

Moreover, the company’s PEG ratio of 0.40 indicates that its price is low relative to expected earnings growth, further supporting the notion that the stock is fairly valued or potentially undervalued compared to peers with higher PEG ratios.

Risks and Considerations

Despite the attractive valuation, investors should be mindful of the stock’s recent weak price performance and the broader challenges facing the transport services sector. The company’s dividend yield is currently not available, which may deter income-focused investors. Additionally, the sector’s sensitivity to economic cycles and fuel price fluctuations could impact future profitability and share price stability.

However, the company’s solid returns on capital and reasonable valuation multiples provide a cushion against these risks, making it a candidate for investors seeking value opportunities within the transport services space.

Conclusion: Fairly Valued with Potential Upside

In summary, Zeal Global Serv is currently fairly valued based on key financial ratios and peer comparisons. Its valuation metrics are modest relative to the sector, and its strong ROCE and ROE figures highlight operational efficiency. While the stock has underperformed the broader market recently, this may present a buying opportunity for value-oriented investors willing to look beyond short-term volatility.

Investors should weigh the company’s fair valuation against sector risks and monitor market conditions closely. For those seeking a transport services stock with reasonable pricing and solid fundamentals, Zeal Global Serv merits consideration.

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