Muthoot Finance Valuation Shifts Signal Renewed Price Attractiveness

Valuation Metrics Reflecting Renewed Appeal

As of 17 Feb 2026, Muthoot Finance trades at a P/E ratio of 16.12, a notable moderation from previous levels that had placed it in the expensive category. This figure compares favourably against sector heavyweights such as Bajaj Finance and Bajaj Finserv, which command P/E ratios of 34.58 and 32.9 respectively, underscoring Muthoot’s relative valuation appeal. The company’s price-to-book value stands at 3.94, signalling a fair valuation when juxtaposed with peers like Shriram Finance (P/BV of 22.32) and Tata Capital (41.28), which remain in the expensive bracket.

Enterprise value multiples further corroborate this shift. Muthoot’s EV to EBITDA ratio is 12.49, comfortably below Bajaj Finance’s 19.12 and Bajaj Finserv’s 12.87, indicating a more reasonable pricing relative to earnings before interest, tax, depreciation and amortisation. The PEG ratio, a critical gauge of valuation relative to earnings growth, is exceptionally low at 0.21, suggesting that the stock is undervalued relative to its growth prospects. This contrasts sharply with Bajaj Finance’s PEG of 2.57 and Bajaj Finserv’s 2.05, which imply premium pricing.

Strong Financial Performance Underpins Valuation

Muthoot Finance’s return on capital employed (ROCE) and return on equity (ROE) stand at 13.02% and 24.47% respectively, reflecting efficient capital utilisation and strong profitability. These metrics are critical for investors assessing the quality of earnings and management effectiveness. The company’s dividend yield, while modest at 0.74%, complements its growth orientation, signalling a balanced approach to shareholder returns.

Comparative Sector Analysis

Within the NBFC sector, Muthoot Finance’s valuation repositioning is particularly noteworthy. While Bajaj Finance and Bajaj Finserv continue to trade at premium multiples, Muthoot’s fair valuation status offers a compelling alternative for investors wary of stretched valuations. Life Insurance companies such as SBI Life Insurance and Life Insurance Corporation present very attractive valuations with P/E ratios of 82.66 and 10.37 respectively, but their business models and risk profiles differ markedly from NBFCs, making direct comparisons nuanced.

Price Performance Outpaces Benchmarks

Despite a recent day decline of 2.15%, Muthoot Finance’s longer-term price performance remains impressive. The stock has delivered a 55.23% return over the past year, significantly outperforming the Sensex’s 9.66% gain. Over three and five years, the stock’s returns of 253.26% and 166.07% dwarf the Sensex’s 35.81% and 59.83% respectively, highlighting sustained outperformance. The decade-long return of 1,822.38% further cements its status as a high-growth stock within the NBFC space.

Price Range and Volatility

Currently priced at ₹3,499.70, Muthoot Finance is trading below its 52-week high of ₹4,149.00 but comfortably above its 52-week low of ₹1,964.35. The intraday trading range on 17 Feb 2026 was between ₹3,450.00 and ₹3,576.80, indicating moderate volatility. This price action, combined with valuation moderation, suggests a consolidation phase that could set the stage for renewed upward momentum.

Mojo Score and Analyst Ratings

MarketsMOJO assigns Muthoot Finance a robust Mojo Score of 87.0, reflecting strong fundamentals and positive market sentiment. The company’s Mojo Grade was upgraded from Buy to Strong Buy on 11 Aug 2025, signalling increased confidence in its growth trajectory and valuation appeal. The Market Cap Grade remains at 1, indicating a large-cap status with stable market capitalisation.

Peer Comparison Highlights Valuation Edge

When compared with peers, Muthoot Finance’s valuation stands out as more accessible. Bajaj Finance and Bajaj Finserv, while leaders in the NBFC sector, trade at P/E multiples more than double that of Muthoot. Jio Financial and ICICI AMC are classified as very expensive with P/E ratios exceeding 50, underscoring the premium investors pay for perceived growth and market dominance. Conversely, companies like Life Insurance Corporation and SBI Life Insurance are marked as very attractive or fair but operate in distinct sub-sectors with different risk-return profiles.

Investment Implications and Outlook

The recalibration of Muthoot Finance’s valuation metrics from expensive to fair is a critical development for investors seeking value in the NBFC sector. The company’s strong return metrics, coupled with a low PEG ratio, suggest that the current price does not fully reflect its growth potential. While the recent short-term price correction may cause some caution, the long-term performance and fundamental strength provide a compelling case for accumulation.

Investors should also consider the broader macroeconomic environment and sector-specific risks, including regulatory changes and credit quality trends. However, Muthoot Finance’s consistent profitability and efficient capital deployment, as evidenced by its ROCE and ROE, mitigate some of these concerns.

Conclusion

Muthoot Finance Ltd’s shift to a fair valuation zone, supported by strong financial metrics and superior long-term returns, marks it as a noteworthy contender in the NBFC space. Its valuation multiples now offer a more attractive entry point relative to peers, making it a stock worthy of consideration for investors prioritising both growth and value. The company’s upgraded Mojo Grade to Strong Buy further reinforces this positive outlook, signalling confidence from market analysts and rating agencies alike.

As the stock consolidates near ₹3,500 levels, investors may find this an opportune moment to reassess their exposure to Muthoot Finance, balancing the potential for sustainable gains against prevailing market volatility.

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