SMS Pharma. (SMSPHARMA)

FairStock Score: 21/100 — RISKY

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

Key Financials

Strengths

• 21.40% sales growth and 35.93% profit growth show strong momentum
• Promoter holding of 68.07% aligns management interests with minority shareholders
• Piotroski F-Score of 7/9 indicates solid financial health
• Debt-to-equity of 0.44 is moderate and manageable
• Latest quarter net margin of roughly 11% (₹23 Cr profit on ₹210 Cr sales) demonstrates profitability

Concerns

• P/E of 41.32 and P/B of 6.46 leave no margin of safety
• ROCE of 12.19% and ROE of 14.61% are not exceptional relative to the valuation
• Dividend yield of 0.10% offers negligible income support
• FairStock Score of 33/100 flags overall riskiness

AI Analysis

Let me look at SMS Pharma the way I would look at any business. The company has grown well: sales up 21.40% and profit up 35.93%. That is impressive. But my first question is always: what does the business earn on capital? Return on equity is 14.61% and ROCE is 12.19%. Those are respectable numbers, but they don't signal an economic fortress. A truly wonderful business should show a wide moat and consistently high returns; these figures are moderate, not exceptional. The balance sheet is acceptable: debt-to-equity of 0.44 means leverage is controlled. Promoter holding of 68.07% is a good sign, as those who run the business have their wealth aligned with mine. Piotroski score of 7/9 tells me recent financial health is reasonably sound. The latest quarter sales of ₹210 Cr and net profit of ₹23 Cr gave a net margin of about 11%, which is decent. But valuation is the problem. At ₹415.55, the market capitalises the company at ₹3,607 Cr, or 41.32 times earnings. Book value is only ₹64.34 per share, so I'm paying 6.46 times book. The PEG ratio of 1.44 says the current price already reflects much of the growth. If growth slows, the multiple will compress painfully. A dividend yield of 0.10% gives me virtually no income while I wait. The FairStock Score of 33/100 also flags risk. I always say: price is what you pay, value is what you get. Here I pay a large price for decent but not outstanding economics. I need a substantial margin of safety. I do not see one at this price. A wonderful growth business can be a poor investment if bought too dear. I would wait for a lower price or evidence that returns on capital are improving before acting.

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