Tata Comm (TATACOMM)

FairStock Score: 49/100 — MIXED

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

Key Financials

Strengths

• Profit growth of 59.21% and a Piotroski F-Score of 8/9 indicate a genuine operating improvement.
• Free cash flow of ₹738 crore and a dividend yield of 1.56% provide some shareholder reward.
• Promoter holding of 58.86% aligns management with minority shareholders.
• ROCE of 14.79% is reasonable when adjusted for the company's high leverage.

Concerns

• Valuation is rich: P/E of 39.76, P/B of 14.91, and EV/EBITDA of 164.56 leave no margin of safety.
• Graham Number of ₹385.82 and DCF intrinsic value of ₹1,385.29 are both below the current price, with margin of safety at -314%.
• Debt/Equity of 4.68 is high for a telecom business, and Altman Z-Score of 2.64 sits in the grey zone.
• Sales growth of 6.48% and five-year revenue CAGR of 6.21% are far below profit growth, so the earnings surge may not be durable.

AI Analysis

When I study Tata Communications, I see a business that is improving, but the price already tells that story. The latest quarter delivered ₹6,189 crore in sales and ₹364 crore in net profit. Profit growth of 59.21% looks wonderful, yet sales growth of only 6.48% and a five-year revenue CAGR of 6.21% make clear this is not a broad-based compounding machine. The market is awarding a very high multiple for a bottom-line bounce aided by leverage. Return on equity of 58.87% catches the eye, but debt-to-equity of 4.68 tells me the balance sheet is doing heavy lifting. The more honest return, ROCE, is only 14.79%. On the positive side, the Piotroski score of 8/9, free cash flow of ₹738 crore, and promoter holding of 58.86% give me comfort about management intent and near-term health. But valuation is my bottleneck. At ₹1,580.70, still far below the 52-week high of ₹2,076, the stock trades at 39.76 times earnings and 14.91 times book value. EV/EBITDA of 164.56 is alarming. Graham's number of ₹385.82 and a DCF value of ₹1,385.29 are both below the current price, leaving a margin of safety of negative 314%. The Altman Z-score of 2.64 sits in grey territory. A dividend yield of 1.56% is not enough compensation. In the old days, we would say: don't mix a wonderful business with a miserable price. This may be a good company, but it is not a good investment at ₹1,580.70. I would wait for a better price, or for sales growth and free cash flow to catch up with reported profits.

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