Union Bank of India’s Valuation Shifts to ‘Very Attractive’ Amid Strong Market Performance

Valuation Metrics Signal Enhanced Price Attractiveness

Union Bank of India’s price-to-earnings (P/E) ratio currently stands at a notably low 7.09, a figure that positions the stock well below many of its public sector banking peers. This valuation is particularly compelling when compared to State Bank of India’s (SBI) P/E of 13.3, which is categorised as expensive, and even Bank of Baroda’s P/E of 7.38, which is also rated very attractive but slightly higher than Union Bank’s. The price-to-book value (P/BV) ratio of 1.03 further underscores the stock’s undervaluation, hovering just above book value and signalling limited downside risk from a capital perspective.

Moreover, the price-to-earnings-growth (PEG) ratio of 0.56 indicates that Union Bank’s earnings growth prospects are not fully priced in by the market, offering an attractive entry point for investors seeking value in the public sector banking space. This PEG ratio is significantly lower than Punjab National Bank’s 1.11, reinforcing Union Bank’s relative valuation advantage.

Financial Performance and Quality Metrics

Union Bank’s return on equity (ROE) of 14.57% and return on assets (ROA) of 1.24% reflect a healthy profitability profile, especially within the public sector banking sector where asset quality and capital efficiency are critical. The net non-performing assets (NPA) to book value ratio of 4.05% remains a point of caution but is manageable within the context of improving credit quality trends across the sector.

Dividend yield at 2.76% adds an income component to the stock’s appeal, complementing its valuation and growth prospects. These financial metrics collectively contribute to the recent upgrade in the company’s Mojo Grade from Buy to Strong Buy, with a Mojo Score of 81.0, signalling strong conviction among analysts and market participants.

Market Performance Outpaces Benchmarks

Union Bank’s stock price has demonstrated remarkable resilience and growth over multiple time horizons. Year-to-date, the stock has delivered a return of 10.89%, significantly outperforming the Sensex’s negative 4.17% return over the same period. Over the past year, the bank’s shares have surged by 51.53%, dwarfing the Sensex’s modest 5.37% gain. Even more impressively, the five-year return of 416.82% far exceeds the Sensex’s 64.00% appreciation, highlighting the stock’s long-term value creation potential.

Despite a slight dip of 1.24% in the past week, the overall trend remains strongly positive, supported by a current market price of ₹170.55, close to its 52-week high of ₹183.40 and well above the 52-week low of ₹106.60. This price action reflects sustained investor confidence and a favourable risk-reward profile.

Comparative Valuation Within the Public Sector Banking Industry

When analysing Union Bank’s valuation in the context of its peers, the bank’s very attractive rating stands out. While SBI remains expensive with a P/E of 13.3 and an EV/EBITDA of 16.84, Union Bank’s valuation metrics are more conservative, reflecting a market perception of lower risk or undervaluation. Bank of Baroda and Punjab National Bank also hold very attractive valuations, with P/E ratios of 7.38 and 8.63 respectively, but Union Bank’s lower PEG ratio suggests better growth-adjusted value.

This relative valuation advantage is critical for investors seeking exposure to the public sector banking sector without overpaying for growth or quality. The bank’s improving fundamentals, combined with its attractive valuation, provide a compelling case for accumulation, especially given the sector’s cyclical recovery and improving asset quality trends.

Outlook and Investment Considerations

Union Bank’s upgrade to a Strong Buy Mojo Grade on 2 February 2026 reflects a consensus view that the stock’s valuation has shifted favourably, offering investors a rare opportunity to acquire shares at a discount to intrinsic value. The bank’s robust ROE and ROA, coupled with manageable NPAs and a healthy dividend yield, underpin this positive outlook.

Investors should, however, remain mindful of sector-specific risks such as credit cycles, regulatory changes, and macroeconomic factors that could impact asset quality and profitability. Nonetheless, the bank’s valuation metrics provide a margin of safety, and its market performance relative to the Sensex suggests strong investor confidence.

Historical Returns Highlight Long-Term Value Creation

Union Bank’s long-term returns further validate its valuation upgrade. Over the past decade, the stock has delivered a 35.20% return, which, while trailing the Sensex’s 232.80%, is impressive given the bank’s sector and historical challenges. More striking are the five-year and three-year returns of 416.82% and 132.83% respectively, which far exceed the Sensex’s 64.00% and 36.26% gains over the same periods.

This outperformance reflects the bank’s successful turnaround efforts, improving asset quality, and enhanced profitability, which have been recognised by the market through a re-rating of its valuation multiples. The current price near the 52-week high of ₹183.40 indicates sustained investor interest and confidence in the bank’s growth trajectory.

Conclusion: A Compelling Opportunity in Public Sector Banking

Union Bank of India’s shift to a very attractive valuation grade, combined with strong financial metrics and superior market returns, positions it as a compelling investment opportunity within the public sector banking space. The upgrade to a Strong Buy Mojo Grade and a high Mojo Score of 81.0 reflect a positive consensus on the stock’s prospects.

Investors seeking value and growth in the banking sector should consider Union Bank’s favourable P/E, P/BV, and PEG ratios, alongside its improving profitability and manageable asset quality risks. While macroeconomic and sector-specific challenges remain, the bank’s valuation provides a cushion and an attractive entry point for long-term investors.

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