Rajasthan Tube Manufacturing Co Ltd Valuation Shifts to Very Expensive Amid Sharp Price Decline

Valuation Metrics Signal Elevated Risk

The company’s price-to-earnings (P/E) ratio has plummeted to an anomalous -500.87, reflecting significant losses and volatility in earnings. This negative P/E is a stark contrast to its peers in the Iron & Steel Products sector, where competitors like Rama Steel Tubes trade at a P/E of 67.67, and Hariom Pipe at a more reasonable 18.67. The negative P/E ratio indicates that Rajasthan Tube Manufacturing is currently loss-making or reporting negative earnings, which investors typically view as a red flag.

Further compounding concerns is the price-to-book value (P/BV) ratio, which stands at a lofty 17.61. This is substantially higher than the sector average and peer companies such as Ratnaveer Precis (P/BV not explicitly stated but implied lower) and Beekay Steel Industries, which are considered very attractive investments. A P/BV ratio this elevated suggests the stock is trading well above its net asset value, raising questions about the sustainability of its current market price.

Enterprise Value Multiples and Profitability Ratios

Enterprise value to EBITDA (EV/EBITDA) and EV to EBIT ratios are both at 135.76, an extraordinarily high figure compared to peers like Hariom Pipe (8.16 EV/EBITDA) and Steel Exchange (10.3 EV/EBITDA). Such inflated multiples imply that the market is pricing in expectations of significant future growth or turnaround, which currently appears unsupported by fundamentals.

Profitability metrics further underline the company’s challenges. The latest return on capital employed (ROCE) is a modest 5.12%, while return on equity (ROE) is negative at -3.52%. These figures indicate weak operational efficiency and poor returns for shareholders, which do not justify the elevated valuation multiples.

Price Performance and Market Capitalisation Context

Rajasthan Tube Manufacturing’s share price closed at ₹30.00 on 12 Feb 2026, down sharply from the previous close of ₹39.69. The stock’s 52-week high was ₹57.95, while the low was ₹12.23, showing significant volatility over the past year. Despite the recent price drop, the company’s market cap grade remains low at 4, reflecting its relatively small size and associated liquidity risks.

Comparing returns with the broader Sensex index reveals a mixed picture. While the stock has underperformed the Sensex over the short term—losing 23.39% in the past week and 30.25% over the last month—the longer-term returns are impressive. Over one year, the stock has gained 197.09%, and over three years, an extraordinary 1,530.43%, vastly outpacing the Sensex’s 10.41% and 38.81% returns respectively. Over a decade, the stock’s return of 2,042.86% dwarfs the Sensex’s 267.00% gain. This historical outperformance may explain some investor optimism despite current valuation concerns.

Mojo Score and Rating Downgrade

MarketsMOJO assigns Rajasthan Tube Manufacturing a Mojo Score of 7.0, which corresponds to a Strong Sell rating. This is a downgrade from the previous Sell grade as of 22 Dec 2025, reflecting deteriorating fundamentals and heightened valuation risks. The valuation grade has shifted from risky to very expensive, signalling that the stock is no longer considered a bargain despite its recent price correction.

This downgrade is consistent with the company’s stretched valuation multiples and weak profitability metrics. Investors should be cautious, as the current price does not appear to offer a margin of safety relative to intrinsic value or peer benchmarks.

Peer Comparison Highlights Valuation Disparities

Within the Iron & Steel Products sector, Rajasthan Tube Manufacturing’s valuation stands out as an outlier. While companies like Hariom Pipe, Ratnaveer Precis, and Beekay Steel Industries are rated as very attractive or attractive based on their reasonable P/E ratios (ranging from 12.05 to 30.61) and moderate EV/EBITDA multiples (8.16 to 11.64), Rajasthan Tube’s metrics are extreme and suggest overvaluation.

Other peers such as Gandhi Special Tube are also classified as very expensive but still trade at a far lower P/E of 13.72 and EV/EBITDA of 12.19, underscoring the relative extremity of Rajasthan Tube’s valuation. Companies like Panchmahal Steel and India Homes are labelled risky due to loss-making status, but Rajasthan Tube’s valuation is even more stretched despite similar earnings challenges.

Investment Implications and Outlook

Given the current valuation profile, investors should approach Rajasthan Tube Manufacturing with caution. The company’s negative earnings, high price multiples, and weak returns on capital suggest that the market is pricing in a turnaround that has yet to materialise. The recent sharp price decline may reflect growing investor scepticism about the sustainability of the company’s business model and growth prospects.

However, the stock’s impressive long-term returns indicate that it has delivered substantial value to patient investors in the past. This historical context may explain why some market participants remain optimistic despite the present challenges. Nonetheless, the downgrade to a Strong Sell rating and the very expensive valuation grade highlight the risks of investing at current levels.

Conclusion: Valuation Concerns Overshadow Historical Gains

Rajasthan Tube Manufacturing Co Ltd’s valuation has shifted markedly towards the very expensive end of the spectrum, driven by negative earnings, sky-high price multiples, and weak profitability ratios. While the stock’s long-term returns have been exceptional, the recent downgrade to a Strong Sell rating and the sharp price decline reflect growing investor concerns about the company’s near-term prospects.

Investors should weigh the risks of overvaluation against the company’s historical performance and sector dynamics. Given the current metrics, the stock appears unattractive relative to peers and broader market benchmarks, suggesting that more prudent opportunities may exist elsewhere in the Iron & Steel Products sector or beyond.

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