Federal Bank (FEDERALBNK)

FairStock Score: 61/100 — STEADY

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

Key Financials

Strengths

• Piotroski F-Score of 8/9 indicates solid overall financial health across profitability, leverage, and efficiency.
• Latest quarterly net profit of ₹1,125 Cr on sales of ₹7,360 Cr with free cash flow of ₹5,002 Cr shows cash generation.
• Book value of ₹140.20 and ROE of 11.86% provide a reasonable, if not spectacular, return on equity.
• DCF intrinsic value estimate of ₹572.75 implies potential long-term upside if growth assumptions hold.

Concerns

• Growth is weak: sales up only 5.48% and profit up 1.40%.
• At ₹295.40, price is 18.04x earnings and 2.11x book, with no margin of safety versus Graham Number of ₹238.69.
• Zero promoter holding raises governance and owner-alignment concerns.
• Dividend yield of just 0.40% offers little compensation while waiting for value to emerge.

AI Analysis

Let me look at Federal Bank as a business first. It is a private sector lender with a book value of ₹140.20, earning a return on equity of 11.86%. That is respectable, but not outstanding. The latest quarter shows net profit of ₹1,125 Cr on sales of ₹7,360 Cr, and free cash flow of ₹5,002 Cr, suggesting the core operation generates cash. The Piotroski score of 8/9 is also reassuring. But value is price plus growth. Sales grew only 5.48% and profit grew a meagre 1.40%. That is a slow grower, not a compounding machine. A bank's debt-equity of 9.15 reflects deposits, not distress, so I won't judge it like an industrial company. Still, the market is asking ₹295.40 for a share with earnings power that grew less than 2%. That is 18 times earnings and 2.11 times book. Graham's defensive number is only ₹238.69, so my margin of safety is negative at 25.6%. The DCF says ₹572.75, but I cannot rely on a discounted-cash-flow figure when growth is so modest. I also note zero promoter holding; in a bank, minority shareholders need strong board and management oversight. Dividend yield of 0.40% offers little while I wait. Altman Z-score of 0.47 is low, but bank balance sheets with deposit funding often make this measure less meaningful. The share has traded between ₹188 and ₹364 over the past year, so emotion, not earnings, has driven that range. I would not chase it here. If it falls closer to book value or shows real acceleration in profit, I would be interested. At current price, the arithmetic does not favour the buyer.

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