| name | valuation-analysis |
| description | Assess valuation for NSE/BSE stocks using P/E, P/B, EV/EBITDA, dividend yield, ROE, ROCE,
peer comparison, historical valuation, growth expectations, and margin of safety.
|
Valuation Analysis
Valuation should answer: is the stock price reasonable for the quality, growth, and risk?
Tools
USE these tools in this order:
- Groww MCP quote tool — current price, market cap, and current P/E, P/B, EV/EBITDA if available. Primary source for live price data.
- Finance portals (Screener, Trendlyne, Tickertape) — historical P/E range, peer comparison, multi-year valuation tables. These are the primary source for valuation history and peer data.
- Company annual report / investor presentation — for segment-level valuation if sum-of-parts is relevant.
- NSE/BSE filings — for recent corporate actions (bonuses, splits, rights issues) that affect historical P/E comparability.
- Web search — only if the above tools do not provide historical valuation range or peer data.
If Groww MCP is unavailable, USE yfinance immediately to get current price and basic ratios via .info. Combine with finance portal data. Do not rely solely on web search for valuation inputs.
Inputs
- Current market price and market cap
- EPS, book value, EBITDA, debt, cash, dividend
- P/E, P/B, EV/EBITDA, dividend yield
- ROE, ROCE, growth rate, margin trend
- Peer valuations and historical valuation range
Method
- Compare the stock with 3-5 relevant listed peers. Adjust for ROE quality: a stock with 25% ROE trading at 30x P/E may be cheaper than a stock with 8% ROE at 20x P/E on a growth-adjusted basis.
- Compare current multiple with the stock's historical range when available.
- Check whether premium valuation is justified by moat, growth, ROE/ROCE, cash flow, and governance.
- For cyclicals, avoid relying on peak earnings alone. Use normalize earnings (5-7 year average) or book-value-based metrics. A cyclical at trough P/E looks cheap; it's usually not.
- For loss-making or turnaround companies, explain why standard P/E is not meaningful. Use EV/sales, EV/EBITDA, price/book, or sum-of-parts.
- Judge margin of safety: attractive, reasonable, thin, or absent.
Multiple Estimation Formula
Worked forward:
- Estimate year-1 EPS: Apply conservative growth to current EPS.
- Choose the multiple: Start from the current P/E, then adjust:
- +2-4 turns if moat is durable AND growth is above sector AND ROCE > WACC by >5%
- −2-4 turns if leverage is elevated OR governance concerns OR growth is slowing
- Neutral if nothing material has changed
- Bull multiple: reasonable expansion (say +3-5x) only if the thesis has multiple re-rating drivers.
- Bear multiple: compression (say −3-5x) if earnings deteriorate or macro/sector de-rates.
- Cross-check: The implied price should be near technical resistance (bull) or support (bear). If the math and the chart disagree significantly, investigate why.
Do not pull fair-value numbers out of ratio tables. Always anchor to current price and work the range from there.
Valuation Verdict
| Verdict | Meaning |
|---|
| Attractive | Valuation offers upside with reasonable downside protection |
| Fair | Price broadly matches quality and growth |
| Expensive | Good business but valuation leaves little room for error |
| Overvalued | Price assumes too much perfection |
| Not Meaningful | Earnings or business stage makes standard valuation unreliable |
Output
## Valuation
- Current valuation: ...
- Peer comparison: ...
- Historical context: ...
- Growth-adjusted view: ...
- Margin of safety: ...
- Valuation verdict: ...
Do not use false precision. Prefer valuation ranges and scenario logic over exact fair value claims.
