TATACOMM - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 3.2

📊 Core Financials Overview

Profitability

ROE: 5.93% and ROCE: 6.39% are modest, indicating underwhelming capital efficiency for a tech-driven enterprise.

EPS of ₹29.7 and a P/E of 95.6 suggest the stock is significantly overvalued relative to earnings, especially compared to the industry PE of 46.0.

PAT improved QoQ from ₹109 Cr to ₹136 Cr, but the −27.3% YoY profit variation signals earnings volatility.

Balance Sheet Health

Debt-to-equity ratio: 0.37 — moderate and manageable.

Book Value of ₹367 vs Current Price ₹1,684 → P/B ratio ~4.59, which is elevated for a telecom infrastructure company.

Dividend Yield of 1.48% adds modest income appeal.

Cash Flow & Stability

PEG ratio of −4.91 is distorted due to inconsistent earnings growth.

RSI at 59.5 and MACD positive suggest neutral-to-mild bullish momentum.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 95.6 Extremely overvalued vs industry PE

P/B Ratio ~4.59 Premium pricing

PEG Ratio −4.91 Not meaningful due to erratic growth

Intrinsic Value ~₹1,400–₹1,500 Estimated below current price

Tata Communications appears overvalued, particularly given its modest return metrics and inconsistent earnings trajectory.

🌐 Business Model & Competitive Edge

Sector: Tata Communications Ltd is a global digital ecosystem enabler, offering connectivity, cloud, cybersecurity, and media services across 190+ countries.

Strengths

Strategic partnerships and enterprise-grade infrastructure

Strong presence in global data networks and undersea cable systems

Diversified revenue streams across collaboration, IoT, and managed services

Challenges

High valuation not backed by consistent profitability

Analysts have revised EPS estimates downward over the past year

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Sales outlook remains uncertain, with poor visibility into future growth

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Despite its global footprint and digital infrastructure, Tata Communications faces margin pressure and valuation concerns.

📌 Entry Zone Recommendation

Suggested Entry Range: ₹1,400–₹1,500

Below 50 DMA (₹1,643) and closer to intrinsic value

RSI suggests waiting for a pullback before entry

🧭 Long-Term Holding Guidance

Hold if Already Invested: Provided you're targeting long-term digital infrastructure exposure.

Avoid Fresh Entry at Current Levels: Wait for valuation to cool or earnings to stabilize.

Watchlist Triggers

EPS recovery and margin expansion

Free cash flow improvement

Institutional accumulation and strategic wins

You can explore deeper insights on MarketScreener’s analyst breakdown

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or TopStockResearch’s dashboard

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1

www.marketscreener.com

2

www.topstockresearch.com

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