Tata Consumer (TATACONSUM)

FairStock Score: 45/100 — MIXED

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

Key Financials

Strengths

• Strong balance sheet: debt/equity of 0.13 and Altman Z-Score of 3.63 indicate low financial risk.
• Piotroski F-Score of 8/9 shows robust recent financial health across profitability, leverage, and efficiency.
• Tata promoter holding of 33.84% provides governance and long-term orientation.
• Recent momentum: sales grew 14.93% and profit grew 27.10%, with quarterly sales of ₹5,112 crore.

Concerns

• Expensive valuation: P/E 77.87, P/B 5.86, EV/EBITDA 21.76, and PEG 179.01 leave no margin of safety; Graham number is ₹261.53 and margin of safety is -336.28%.
• Low returns on capital: ROE of 7.34% and ROCE of 9.16% are inadequate for the premium multiple.
• Negative free cash flow: FCF of -₹246 crore contradicts reported profit growth.
• Low dividend yield of 0.72% means shareholders are dependent solely on price appreciation.

AI Analysis

Let me begin with the obvious: at ₹1,184.40, I am being asked to pay ₹1.13 lakh crore for a company whose earnings are 77.87 times trailing profits. Graham would remind me that the Graham number is ₹261.53, so my margin of safety is negative 336%. That is not a cushion; it is a cliff. Yes, Tata Consumer has a familiar Tata name, and promoter holding of 33.84% gives me some comfort about governance. Financially, the company is safe: debt/equity is 0.13, Altman Z-Score is 3.63, and the Piotroski F-Score is 8 out of 9. But safety is not the same as attractive returns. Book value is ₹202.12, yet ROE is only 7.34%, and ROCE is 9.16%. For a single-digit return on capital, I would not normally pay 5.86 times book. The latest quarter says sales were ₹5,112 crore and net profit ₹385 crore; sales are growing 14.93% and profit growth is 27.10%. But the five-year revenue CAGR is just 8.71%. This is a steady consumer franchise, not a supercharged compounder. The cash flow statement bothers me: free cash flow is minus ₹246 crore. Earnings growing while cash is burning tells me I should look under the hood before trusting net profit. Dividend yield of 0.72% does not reward me while I wait. The PEG ratio of 179.01 shows the market has priced in decades of perfection. The EV/EBITDA of 21.76 reinforces that. Benjamin Graham would say: 'Price is what you pay; value is what you get.' I admire the business, but at this price I get a moderate grower with low returns, negative free cash flow, and almost no dividend. I would rather remain patient and wait for a margin of safety. Tata Consumer is a fine company; this is not the right price.

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