Is Power Finance Corporation Limited (NSE:PFC) Cheap And High Growth?

Power Finance Corporation Limited (NSEI:PFC), a ₹292.92B mid-cap, operates in the financial services industry, which tends to be appealing to risk-averse investors attracted to steady revenues, low volatility and high dividend yields. However, more recently, poor management decisions, such as those involved in subprime loans and derivatives, significantly raised operating risk, limiting the industry's investment suitability to those who are less risk averse. Financial services analysts are forecasting for the entire industry, negative growth in the upcoming year . Is the diversified financial services industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Power Finance is lagging or leading its competitors in the industry. See our latest analysis for Power Finance

What’s the catalyst for Power Finance's sector growth?

Recently, government and overseas regulators involvement has increased to play a prominent role, closely examining and controlling day-to-day business administration of certain companies. In the previous year, the industry saw growth in the twenties, beating the Indian market growth of 13.95%. Power Finance lags the pack with its negative growth rate of -63.84% over the past year, which indicates the company will be growing at a slower pace than its diversified financial services peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of over 100% in the upcoming year. This future growth may make Power Finance a more expensive stock relative to its peers.

Is Power Finance and the sector relatively cheap?

The financial services sector's PE is currently hovering around 25.3x, in-line with the Indian stock market PE of 25.8x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 6.03% compared to the market’s 9.68%, potentially indicative of past headwinds. On the stock-level, Power Finance is trading at a lower PE ratio of 13x, making it cheaper than the average diversified financial services stock. In terms of returns, Power Finance generated 6.14% in the past year, in-line with its industry average.

Next Steps:

Power Finance’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its financial services peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. However, before you make a decision on the stock, I suggest you look at Power Finance's fundamentals in order to build a holistic investment thesis.

• 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
• 2. Historical Track Record: What has PFC's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
• 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Power Finance? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.