Muthoot Finance (MUTHOOTFIN)

FairStock Score: 74/100 — STEADY

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

Key Financials

Strengths

• High ROE of 29.69% and profit growth of 75.64% show strong capital efficiency and recent momentum.
• Promoter holding of 73.35% aligns owner and minority interests.
• P/E of 15.44 and PEG of 0.44 suggest the growth is not fully overpaid for on an earnings basis.
• Piotroski F-Score of 7/9 indicates solid financial fundamentals.
• Latest quarter scale is impressive: sales ₹8,188 Cr and net profit ₹2,823 Cr.

Concerns

• Free cash flow is deeply negative at ₹-27,900 Cr, raising questions about true cash generation.
• Debt/Equity of 3.38 amplifies financial risk, even for an NBFC.
• Price of ₹3,562.65 is far above the Graham Number of ₹1,890.61, leaving a -77.38% margin of safety.
• Altman Z-Score of 1.57 and a low dividend yield of 0.78% offer limited downside cushion.

AI Analysis

Let me start with a confession: I like the business, but I am not sure about the price. Muthoot Finance earns a wonderful return on equity of 29.69%, and the 73.35% promoter holding tells me owners' interests stay aligned with minority shareholders. A P/E of 15.44 is not extortionate for a company compounding profits at 75.64% and sales at 46.84%. The latest quarter reinforces this momentum: ₹8,188 Cr sales and ₹2,823 Cr net profit. The Piotroski score of 7/9 suggests a healthy operating position. But Graham taught me to weigh the numbers with cold discipline. The balance sheet carries debt/equity of 3.38; that is leverage, even for an NBFC. Free cash flow is deeply negative at ₹-27,900 Cr, and the Altman Z-score of 1.57 is uncomfortable. The negative free cash flow may be from lending growth, but I cannot ignore the cash drag. The ₹731.48 book value supports a price of ₹3,562.65, yet P/B is 4.87 and ROE is 29.69%—the market is paying for excellence. My Graham Number is ₹1,890.61, less than half the current price. That gives me a margin of safety of -77.38%. In Buffett's words, it is far better to pay a fair price for a wonderful business than a wonderful price for a fair business. But here the gap between price and conservative value is too wide. Dividend yield of 0.78% offers little income cushion. I would wait for a lower price, or for earnings to grow into today's valuation. This is a fast grower with real strengths; it just does not yet meet my margin-of-safety test.

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