Voltas (VOLTAS)

FairStock Score: 22/100 — RISKY

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

Key Financials

Strengths

• Five-year revenue CAGR of 15.32% shows a meaningful historical growth trajectory.
• ROCE of 17.64% indicates decent operating capital efficiency despite weak ROE.
• Debt/equity of 0.28 and Altman Z-score of 4.09 signal manageable leverage and low near-term bankruptcy risk.
• Promoter holding of 30.30% provides some alignment of interests.

Concerns

• Extreme valuation: P/E of 99.64, EV/EBITDA of 102.86, and Graham Number of ₹258.86 imply a margin of safety of -503.14%.
• Declining fundamentals: sales growth of -4.88%, profit growth of -30.14%, and Piotroski F-Score of 4/9.
• Poor cash conversion: free cash flow is -₹66 Cr, while latest-quarter net margin is only about 2.7%.
• Weak shareholder returns: ROE of 7.69% and dividend yield of just 0.45%.

AI Analysis

At ₹1,445.50, Voltas is priced as a flawless compounder, but the reported figures do not support that conclusion. The past five-year revenue CAGR of 15.32% catches my eye, yet the latest year shows sales down 4.88% and profit down 30.14%. In the latest quarter Voltas generated ₹3,071 Cr in sales and only ₹84 Cr in net profit—about a 2.7% margin. That is not the kind of earning power that justifies a P/E of 99.64 or an EV/EBITDA of 102.86. Ben Graham taught me to buy with a margin of safety; here the Graham Number is ₹258.86, meaning the current price offers a margin of safety of negative 503%. Mr Market is asking me to pay more than five times a conservative fair-value estimate. The balance sheet is not broken. Debt/equity is 0.28, and Altman Z of 4.09 suggests no near-term solvency worry. ROCE of 17.64% suggests efficient use of capital once debt and taxes are considered. But return on equity is just 7.69%, and free cash flow is negative ₹66 Cr, so the business is consuming cash in a period of declining profit. The Piotroski score of 4/9 reinforces my caution: financial health is deteriorating, not improving. I value consistent cash generation and attractive returns on invested capital. Voltas has past growth and a solid balance-sheet, but its latest performance is cyclical, not compounding. At a price that assumes perfection, the downside is far greater than the upside. I will wait for either a much lower price or clear proof that earnings and cash flow have turned sustainably higher. For now, this is too risky for my capital.

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