🔍 3 Undervalued Stocks with Strong Fundamentals and Single-Digit PE Ratios in 2025
“In the short run, the stock market is a voting machine, but in the long run, it is a weighing machine.”
— Benjamin Graham, mentor to Warren Buffett
This timeless quote captures the essence of value investing. Markets may overlook or undervalue strong companies ( or Undervalued Stocks ) in the short term, but in the long run, company fundamentals determine stock performance. In this article, we explore three such undervalued stocks in 2025—each with a single-digit PE ratio, strong balance sheets, and consistent profit growth that the market may be ignoring or is yet to rerate.
Let’s dive in.
🏦 1. Bank of India (BOI): Strength in Numbers, Yet Ignored by the Market
PE Ratio: ~7x
Price to Book: 0.7x (vs industry avg 1.05x)
Government Stake: 73%
Founded in 1906, Bank of India (BOI) is a major public sector bank with a full suite of services. Despite a robust performance in FY25, its valuation remains deeply discounted.
Key Financial Highlights:
- Net Profit: â‚ą929 crore, up 45.92% YoY
- Operating Profit: â‚ą142 crore, up 1.66% YoY
- Advances: â‚ą5,358.22 crore, up 15.33% YoY
- Non-interest Income: Grew by 46% YoY
- Gross NPA: Fell by â‚ą7,434 crore, a 25.5% drop
- Capital Adequacy Ratio: 17.77%, up 81 bps YoY
Revenue Breakdown (FY25):
- Retail Banking: â‚ą3,153 crore (40.2%)
- Treasury: â‚ą2,735 crore (27.9%)
- Wholesale Banking: â‚ą3,339 crore (31.7%)
Why It’s a Hidden Gem:
- Despite declining NIMs (from 2.97% to 2.82%), the bank offset the margin squeeze with higher recoveries and non-interest income.
- Global presence, improved asset quality, and consistent credit demand signal potential rerating ahead.
đź’Š 2. Natco Pharma: Complex Generics Powerhouse at a Discount
PE Ratio: 8.7x
Historical PE Avg: 19.5x
Industry PE Avg: 33.8x
Debt-to-Equity: 0.04
Natco Pharma is a mid-sized pharmaceutical company specializing in complex generics and oncology drugs. Despite strong financials and global reach, it’s trading at a steep discount.
FY25 Highlights:
- Revenue: â‚ą4,784 crore, up 16% YoY
- Export Formulations: â‚ą3,759 crore, up 16% YoY
- Operating Margins: 49.6% (up from 30.4% in FY20)
- Other Income: â‚ą362.7 crore, up 2x YoY
Key Concerns:
- Patent expiry of blockbuster drug G-Revlimid by FY26, which may reduce revenue by 20%.
- High dependency on complex generics = concentration risk.
- Cash conversion cycle of 362 days due to high inventory levels.
What’s Working:
- Strong cash reserves of â‚ą3,500+ crore
- Upcoming launches like Pristam and Semaglutide
- Aggressive R&D allocation of â‚ą400 crore in next-gen therapies
Why It’s Undervalued:
Despite looming headwinds, Natco’s fundamentals remain strong. Execution on its post-G-Revlimid strategy could lead to significant rerating.
🏠3. LIC Housing Finance: Undervalued Market Leader in Home Finance
PE Ratio: ~9x
Price to Book: 0.88x
5-Year PAT CAGR: 19%
Promoter Holding (LIC): 45.24%
As India’s largest dedicated housing finance company, LIC Housing Finance (LICHFL) has delivered steady growth. Yet, it’s undervalued compared to peers.
FY25 Key Numbers:
- PAT: â‚ą5,429 crore, up 14% YoY
- Disbursement Growth:
- Project Finance: +48% YoY
- Non-Housing Loans: +21% YoY
- Stage 3 Assets: Improved from 3.31% to 2.47%
- Provisions: Down from â‚ą4,877 cr to â‚ą3,894 cr
Margin Pressure:
- NIM Decline: From 3.08% to 2.73%
- Caused by rapid loan repricing post RBI rate cuts, while legacy borrowings held at higher interest costs
Why It’s a Value Buy:
- Trading well below historical and industry valuation multiples
- Strong asset quality improvements
- Growth in high-yield loan segments
đź“Š Final Thoughts: Is the Market Sleeping on These Undervalued Stocks?
Each of the three companies ( or Undervalued Stocks ) —Bank of India, Natco Pharma, and LIC Housing Finance—has shown strong financial performance, yet trades at deeply discounted valuations.
| Stock | PE Ratio | Notable Strength |
|---|---|---|
| Bank of India | ~7x | Strong recovery, low NPAs, improving profitability |
| Natco Pharma | 8.7x | High margins, low debt, strong cash position |
| LIC Housing Finance | ~9x | Market leader, improving asset quality |
If you’re a value investor looking for underrated opportunities with solid fundamentals and future growth potential, these Undervalued Stocks are worth a serious look. The key is timing and patience—the market eventually rewards performance.
âś… What Should You Do?
- Track quarterly performance, especially margins and asset quality of these Undervalued Stocks.
- Watch for re-rating triggers like new product launches, acquisitions, or interest rate stabilization
- Consider long-term holding for compounding returns as the market recognizes their value
📢 Which of these Undervalued Stocks do you think has the highest re-rating potential? Let us know in the comments!
ALSO READ
Follow me on Twitter (X) or Facebook. Join WhatsApp Channel or Facebook Group for Updates.
Liked our article ? Subscribe to get weekly updates