Scoobee Day Garments India Ltd Faces Valuation Reassessment Amid Elevated Multiples

Valuation Metrics: A Closer Look

The latest data reveals that Scoobee Day Garments is trading at a P/E ratio of 1,289.00, a figure that is extraordinarily high compared to typical industry standards and its own historical range. This valuation grade has shifted from 'fair' to 'expensive', signalling that the stock price may have outpaced earnings growth substantially. Similarly, the price-to-book value ratio stands at 40.74, underscoring a premium valuation relative to the company’s net asset base.

Other valuation multiples also reflect this trend. The enterprise value to EBIT (EV/EBIT) ratio is at 110.69, and the EV to EBITDA ratio is 45.47, both indicating elevated price levels relative to operating profitability. The PEG ratio, which adjusts the P/E ratio for earnings growth, is 9.30, further suggesting that the stock is priced for growth that may be difficult to sustain.

In contrast, the company’s return on capital employed (ROCE) and return on equity (ROE) are modest at 3.16% each, highlighting a disconnect between valuation and underlying profitability. These returns are low for the garments and apparels sector, where efficient capital utilisation is critical for competitive advantage.

Comparative Analysis with Peers

When benchmarked against peers within the garments and apparels industry and related sectors, Scoobee Day Garments’ valuation appears significantly stretched. For instance, String Metaverse, another player in the broader sector, trades at a P/E of 54.58 and an EV/EBITDA of 46.19, categorised as 'very expensive' but still far below Scoobee’s multiples. Meanwhile, companies like Kuantum Papers and Satia Industries, operating in adjacent sectors, are rated 'very attractive' with P/E ratios of 11.9 and 10.05 respectively, and EV/EBITDA multiples under 8.

This stark contrast emphasises the premium investors are currently paying for Scoobee Day Garments shares, which may not be justified by its operational performance or growth prospects. The company’s valuation stands out as an outlier, especially given its relatively low profitability metrics.

Stock Price Performance and Market Context

Despite the lofty valuation, Scoobee Day Garments’ stock price has shown notable momentum recently. The share price closed at ₹83.80, up 9.77% on the day, with a 52-week range between ₹61.95 and ₹133.54. Over the past week and month, the stock has outperformed the Sensex, delivering returns of 12.98% and 12.05% respectively, compared to the Sensex’s 1.79% and -2.27% returns.

However, longer-term returns paint a more cautious picture. Over one year, the stock has declined by 29.51%, while the Sensex gained 6.66%. Over three and five years, Scoobee Day Garments has underperformed the benchmark by 4.13% and 17.49% respectively, against Sensex gains of 37.76% and 65.60%. The ten-year return is an outlier, with an extraordinary 2,789.25% gain, reflecting a period of exceptional growth that is unlikely to be replicated in the near term.

Mojo Score and Rating Update

MarketsMOJO’s latest assessment assigns Scoobee Day Garments a Mojo Score of 23.0, with a Mojo Grade of 'Strong Sell', upgraded from a previous 'Sell' rating on 02 September 2025. This downgrade in sentiment reflects concerns over the company’s stretched valuation and subdued profitability metrics. The market capitalisation grade is rated 4, indicating a mid-cap status but with limited favourability in terms of valuation and growth outlook.

The downgrade signals caution for investors, as the current price levels may not be supported by fundamental earnings growth or operational efficiency. The elevated valuation multiples suggest that the market is pricing in significant future growth, which remains uncertain given the company’s recent financial performance.

Investment Implications and Outlook

Investors considering Scoobee Day Garments should weigh the risks associated with its expensive valuation against the potential for earnings improvement. The company’s low ROCE and ROE indicate challenges in generating adequate returns on invested capital, which may constrain future growth and profitability.

Moreover, the high P/E and P/BV ratios imply that any disappointment in earnings or operational setbacks could lead to sharp price corrections. Comparisons with peers suggest that more attractively valued alternatives exist within the garments and apparels sector and related industries, offering better risk-reward profiles.

Historical Valuation Context

Historically, Scoobee Day Garments traded at far more reasonable valuation multiples. The current P/E ratio of 1,289.00 is a dramatic increase from levels seen in previous years, where the stock typically traded in the range of 20 to 50 times earnings during periods of stable growth. The price-to-book value ratio has similarly expanded from single digits to over 40, reflecting a significant re-rating by the market.

This re-rating may be driven by speculative interest or expectations of a turnaround, but the company’s fundamental metrics do not yet support such optimism. Investors should be cautious about chasing valuations that are disconnected from earnings and asset values.

Conclusion

Scoobee Day Garments India Ltd’s recent valuation shifts highlight a stock that has become expensive relative to its earnings, book value, and peer group comparators. While short-term price momentum has been positive, the underlying financial performance and return metrics suggest limited justification for the current premium. The downgrade to a 'Strong Sell' Mojo Grade underscores the risks inherent in the stock at present levels.

For investors, a prudent approach would be to consider more attractively valued peers within the garments and apparels sector or explore cross-sector opportunities that offer better growth and profitability prospects. Monitoring the company’s operational improvements and earnings trajectory will be essential before reassessing its investment potential.

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