A B B (ABB)

FairStock Score: 45/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• High return ratios: ROE of 21.29% and ROCE of 29.90%
• Near-zero debt/equity of 0.01 and strong free cash flow of ₹1,584 Cr
• Promoter holding of 75% aligns management with minority shareholders
• Healthy balance sheet: Piotroski F-Score 7/9 and Altman Z-Score 7.69
• Latest quarter converted ₹3,557 Cr sales into ₹433 Cr net profit (~12.2% margin)

Concerns

• Extremely high valuation: P/E 77.09 and P/B 20.47, with price far above Graham Number of ₹809.35 and DCF value of ₹228.67
• Margin of safety is deeply negative at -650.36%
• Profit growth of only 0.17% despite sales growth of 9.80% — earnings are not keeping pace with topline
• Low dividend yield of 0.73% offers little downside support; FairStock Score is mixed at 45/100

AI Analysis

Let me be blunt: ABB is a wonderful business, but not a wonderful stock at today's price. The quality metrics are impressive — a 21.29% ROE, 29.90% ROCE, and a balance sheet with debt/equity of just 0.01. It generated ₹1,584 Cr of free cash flow and a Piotroski score of 7/9 suggests solid fundamentals. Promoter holding at 75% aligns interests. This is the type of franchise that earns its high returns for a long time. But as Graham said, price is what you pay. At ₹7,570, the market capitalisation is ₹1.29 lakh Cr on a P/E of 77 and P/B of 20.47. Book value is only ₹369.78. The Graham Number is ₹809.35, and even a discounted cash flow estimate of ₹228.67 suggests the price has run far ahead of conservative intrinsic value. Margin of safety is deeply negative, around -650%. Meanwhile, profit growth is just 0.17% despite sales growth of 9.80% — the company is not converting topline into shareholder earnings at this level. Dividend yield of 0.73% gives small comfort. At best, this is a high-quality cyclical: heavy electrical equipment follows capital-expenditure cycles, and the low profit growth suggests we may be mid-cycle. The Altman Z-score of 7.69 tells me there is no bankruptcy risk; the concern is entirely valuation. I would want the price to be much lower, or earnings to grow into this multiple over several years. Let me remain patient. A wonderful business at a fair price is good; at 77 times earnings it tests even the most optimistic assumptions.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer