VTM Ltd Valuation Shifts to Very Expensive Amid Strong Price Rally

Valuation Metrics Reflect Elevated Pricing

As of 6 Feb 2026, VTM Ltd’s P/E ratio stands at 22.36, a notable increase that places it firmly in the “very expensive” category according to MarketsMOJO’s grading system. This is a marked change from its previous “fair” valuation status, signalling that investors are now paying a premium for the stock relative to its earnings. The price-to-book value has also risen to 2.72, reinforcing the view that the stock is trading above its net asset value by a considerable margin.

Other valuation multiples such as EV/EBITDA at 14.47 and EV/EBIT at 17.61 further corroborate the premium pricing. These multiples are elevated compared to more attractively valued peers like Sportking India, which trades at a P/E of 11.62 and EV/EBITDA of 6.88, highlighting the relative expensiveness of VTM Ltd within the Garments & Apparels sector.

Peer Comparison Highlights Relative Expensiveness

When benchmarked against its industry peers, VTM Ltd’s valuation metrics reveal a mixed landscape. While several competitors such as R&B Denims (P/E 45.29), SBC Exports (P/E 63.74), and Pashupati Cotsp. (P/E 90.27) are trading at significantly higher multiples, others like Indo Rama Synth. (P/E 7.73) and Sportking India remain attractively priced. This suggests that although VTM Ltd is expensive, it is not the most overvalued stock in its sector.

However, the company’s PEG ratio of 0.37 indicates that its price-to-earnings growth is relatively low, which could imply undervaluation on growth grounds. Yet, this metric should be interpreted cautiously given the overall expensive valuation context and the company’s recent upgrade to a “Strong Sell” Mojo Grade from “Sell” on 5 Feb 2026.

Price Performance Outpaces Market Benchmarks

VTM Ltd’s stock price has surged to ₹82.90, up from the previous close of ₹69.09, marking a 19.99% gain on 6 Feb 2026. This rally has pushed the stock closer to its 52-week high of ₹122.65, well above its 52-week low of ₹53.51. The price momentum is impressive, with returns over various periods significantly outperforming the Sensex. For instance, the stock has delivered a 35.17% return over the past week compared to Sensex’s 0.91%, and a staggering 752.88% return over five years against the Sensex’s 64.22%.

Despite this strong price appreciation, the one-year return of 3.19% trails the Sensex’s 6.44%, indicating some recent underperformance relative to the broader market. This mixed performance underscores the importance of valuation discipline when considering VTM Ltd as an investment.

Financial Quality and Profitability Metrics

VTM Ltd’s return on capital employed (ROCE) stands at a healthy 17.84%, while return on equity (ROE) is 12.17%. These figures suggest the company is generating reasonable returns on its invested capital and shareholder equity, supporting its premium valuation to some extent. However, the dividend yield remains modest at 0.90%, which may not be sufficiently attractive for income-focused investors.

The company’s EV to capital employed ratio of 2.64 and EV to sales of 2.27 further reflect the market’s willingness to pay a premium for its operational efficiency and sales growth prospects. Yet, these multiples are not outliers within the sector, indicating that the valuation premium is primarily driven by earnings expectations rather than asset or sales base.

Mojo Grade Downgrade Signals Increased Risk

MarketsMOJO has recently downgraded VTM Ltd’s Mojo Grade from “Sell” to “Strong Sell” as of 5 Feb 2026, reflecting heightened concerns over valuation and risk. The Mojo Score of 27.0 corroborates this negative outlook, suggesting that investors should exercise caution. The downgrade is likely influenced by the shift in valuation grade from “fair” to “very expensive,” signalling that the stock’s price may have outpaced its fundamental value.

Investment Implications and Outlook

Investors evaluating VTM Ltd must weigh the company’s strong historical price performance and solid profitability metrics against its stretched valuation multiples and recent downgrade in sentiment. The elevated P/E and P/BV ratios suggest limited margin of safety at current prices, especially when compared to more attractively valued peers within the Garments & Apparels sector.

While the company’s PEG ratio below 1.0 hints at growth potential, the overall “very expensive” valuation grade and “Strong Sell” Mojo Grade caution against aggressive accumulation. Investors should consider whether the premium pricing is justified by future earnings growth or if the stock is vulnerable to a correction should growth expectations moderate.

Given the mixed signals, a prudent approach would be to monitor valuation trends closely and consider diversification into better-valued alternatives, particularly those with comparable or superior fundamentals but more reasonable price points.

Historical Context and Sector Dynamics

Over the past decade, VTM Ltd has delivered an extraordinary 557.94% return, vastly outperforming the Sensex’s 238.44% gain. This long-term outperformance reflects the company’s ability to capitalise on growth opportunities within the garments and apparel industry. However, the recent acceleration in price has pushed valuation metrics beyond historical averages, raising concerns about sustainability.

The Garments & Apparels sector itself is characterised by varying valuation profiles, with some companies trading at steep premiums due to brand strength or export potential, while others remain undervalued due to operational challenges. VTM Ltd’s current valuation places it among the more expensive names, necessitating careful analysis of its growth prospects relative to peers.

Conclusion

VTM Ltd’s recent price surge and corresponding valuation shift from fair to very expensive highlight a critical juncture for investors. While the company boasts strong returns and solid profitability, the elevated multiples and negative sentiment downgrade suggest caution. Investors should balance the allure of past performance with the risks posed by stretched valuations and consider alternative opportunities within the sector and broader market.

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