PE Ratio, PB Ratio and EV/EBITDA: How to Value Stocks in India
Blog by Aliceblue News Desk
23 April 2026
15 minutes
The Nifty 50 PE ratio stood at 21.24 on 16 April 2026. If that number means nothing to you yet, you are not alone. Most beginners either ignore it completely or assume lower is always better.
Here is a more grounded way to think about it. TCS trades at around ₹2,359. Wipro trades at around ₹210. Going by price alone, Wipro looks like the bargain. But Wipro’s PE is around 15.6x, and TCS is around 17x. The difference between them is much smaller than the price gap suggests, and it tells a very different story about how the market values each business.
Stock valuation metrics are how you cut through the noise of raw share prices. PE, PB, EV/EBITDA, and PEG each measure something distinct about what you are paying versus what you are getting. This article breaks down each one using real Indian companies and verified April 2026 data, so you can start applying them to your own research. You can check live valuation data for any NSE or BSE-listed stock directly on the Alice Blue stock research platform.
What Are Stock Valuation Metrics?
Every stock has a price. But price without context is meaningless. A share at ₹5,000 can be cheaper than a share at ₹50, depending on what the underlying business earns and owns.
Valuation metrics solve this by anchoring the share price to actual financial performance, whether that is earnings, book value, operating cash flow, or revenue. They let you compare two completely different businesses on a common scale.
Seasoned investors rarely rely on just one metric. PE tells you something about earnings. PB tells you something about assets. EV/EBITDA tells you something about operating cash flows after accounting for debt. Used together, these three ratios give you a reasonably complete picture of whether a stock is priced fairly at any given moment.
Price to Earnings Ratio
What It Is
PE tells you how much investors are paying for each rupee of annual earnings a company generates.
Formula: PE = Market Price Per Share divided by Earnings Per Share (EPS)
TCS vs Wipro, April 2026
Company | Share Price | TTM EPS | PE Ratio |
TCS | ~₹2,359 | ~₹136 | ~17x |
Wipro | ~₹210 | ~₹13.5 | ~15.6x |
Data as of April 2026. Verify current figures on the Alice Blue stock research page.
Looking at prices alone, most people would assume TCS is far more expensive. On PE, the gap is just 1.4x. TCS has historically traded at a premium because the market expected stronger earnings consistency and margin stability. In FY26, that premium has narrowed as TCS revenue growth slowed. This is exactly why PE comparison works, but only within the same sector.
When PE Works
PE is reliable for companies with predictable, recurring earnings. IT services, FMCG, and branded pharma are good examples because their earnings tend to hold up across economic cycles. At an index level, the Nifty 50 long-term PE average sits between 20x and 25x. The current reading of 21.24 suggests the market is neither stretched nor particularly cheap at the index level.
When PE Fails
PE breaks down the moment earnings turn negative. It also ignores debt entirely. A company earning ₹500 crore with zero debt and one earning ₹500 crore with ₹15,000 crore in borrowings show the same PE. That is a significant blind spot, and it is why EV/EBITDA exists.
Price to Book Ratio
What It Is
PB compares a stock’s market price to the company’s book value per share, which is total assets minus total liabilities. It tells you how much you are paying relative to what the company actually owns on paper after settling all its obligations.
Formula: PB = Market Price Per Share divided by Book Value Per Share
HDFC Bank vs SBI, April 2026
Bank | PB Ratio |
HDFC Bank | ~2.3x |
SBI | ~1.7x |
Data as of April 2026. Verify current figures on the Alice Blue stock research page.
HDFC Bank trades at a higher PB than SBI for reasons the market has been consistent about for years. HDFC Bank’s return on equity is higher, its gross NPA ratio is lower, and its loan book has historically held up better during credit stress cycles. SBI’s lower PB is not a signal that it is obviously undervalued. It reflects the additional risk and uncertainty that comes with a public sector bank, where pricing and capital allocation decisions are not always driven purely by shareholder returns.
Banks like Punjab National Bank and Bank of Baroda have at various points traded below 1x PB. This means their share price fell below their stated net worth. The market was essentially saying it did not fully trust the asset quality on the balance sheet, most often because of NPA concerns.
When PB Works
PB is most useful for banks, insurance companies, and NBFCs where the balance sheet is made up of financial assets, loans, and investments that are relatively close to their real economic values.
When PB Fails
PB tells you almost nothing about a technology or services company. The real value of a business like Infosys or Asian Paints sits in its brand, software systems, distribution network, and people. None of those appear on the balance sheet. Applying PB to such companies gives you a number that is technically correct but practically irrelevant.
Enterprise Value to EBITDA
What It Is
EV/EBITDA is built to solve the problem that PE cannot. It includes debt in the valuation, not just the equity market cap.
Breaking it down:
Enterprise Value = Market Capitalisation + Total Debt minus Cash and Cash Equivalents
EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortisation
Formula: EV/EBITDA = Enterprise Value divided by EBITDA
Reliance Industries vs ONGC, April 2026
Company | EV/EBITDA |
Reliance Industries | ~11x to 13x |
ONGC | ~4x to 5x |
Data as of April 2026. Verify current figures on the Alice Blue stock research page.
On this metric, ONGC looks far cheaper. The gap is real, but so is the reason behind it. ONGC’s earnings are tied directly to global crude oil prices, its domestic gas pricing is heavily influenced by government decisions, and its capital allocation history does not inspire confidence among most long-term investors. Reliance commands a higher multiple because Jio and Reliance Retail have diversified their earnings away from pure energy exposure, making their overall cash flows more predictable.
The Airtel Example
Bharti Airtel posted a consolidated EBITDA margin of 57.7% in Q3 FY26. On the surface, the business generates excellent operating cash. But after interest payments on its substantial debt and depreciation on spectrum and tower infrastructure, the net profit margin is a fraction of that. Running PE on Airtel gives you a distorted read because so much of the operating cash never reaches the bottom line. EV/EBITDA captures the underlying business economics before those deductions and is the correct starting point for any telecom or infrastructure comparison.
When EV/EBITDA Works
Capital-intensive sectors are where EV/EBITDA earns its place. Telecom, cement, metals, oil and gas, and infrastructure all carry heavy debt and depreciation loads that make PE readings unreliable. EV/EBITDA normalises those differences and lets you compare businesses on a fairer basis.
When It Falls Short
EV/EBITDA does not account for how much capital a business needs to spend just to stay competitive. Two companies can show the same EV/EBITDA, with one spending ₹5,000 crore a year on maintenance capex and the other spending ₹500 crore. Free cash flow needs to sit alongside EV/EBITDA to complete the picture.
The PEG Ratio
What It Is
PEG adjusts the PE ratio for how fast a company’s earnings are expected to grow. It answers the question that PE alone cannot: Is this high PE number actually justified by the growth behind it?
Formula: PEG = PE Ratio divided by Expected Annual Earnings Growth Rate (%)
Reading the Number
A PEG of 1x is generally considered fair value. Below 1x is potentially attractive. Above 2x suggests the market may be pricing in more growth optimism than the business can realistically deliver.
Take two specialty chemicals companies, both trading at a PE of 40x. The first is growing earnings at 35% per year. Its PEG is 1.14x, which is reasonable for a quality compounder. The second is growing earnings at just 10% per year. Its PEG is 4x. On PE, they look identical. PEG separates them immediately and flags the second as potentially overpriced for the growth it is actually delivering.
When PEG Works
PEG is most useful for growth-oriented businesses where future earnings trajectory matters more than the current multiple. Specialty chemicals, IT services, and select consumer companies in India are where this ratio gets applied most often by analysts and fund managers.
When PEG Falls Short
Earnings growth forecasts are estimates, and estimates are frequently wrong. For cyclical industries like metals or oil and gas, where earnings swing sharply with commodity prices, PEG-based comparisons can mislead more than they inform.
Price to Sales Ratio
What It Is
PS compares a company’s total market cap to its annual revenue.
Formula: PS = Market Capitalisation divided by Annual Revenue
PS becomes relevant when a company has no meaningful profits yet, making PE impossible to calculate. Early-stage fintech, new-age consumer businesses, and companies deliberately reinvesting all earnings for growth are cases where revenue is the only measurable output worth comparing.
The limitation is straightforward. Revenue growth without a credible path to profitability is not a foundation for valuation. Use PS as a relative measure between companies in the same early-growth stage, not as a standalone indicator of value.
Matching the Metric to the Sector
Sector | Best Metric | Reason |
IT, FMCG, Pharma | PE and PEG | Stable, predictable earnings; growth expectations drive premium |
Banking, Insurance, NBFCs | PB and PE | Financial assets dominate; balance sheet values are more reliable |
Telecom, Cement, Metals, Oil, and Gas | EV/EBITDA | Debt and depreciation distort reported profits significantly |
Startups and New-Age Tech | PS Ratio | No profits yet to anchor a PE calculation |
PSU Dividend Stocks | Dividend Yield + PE | Income-seeking investors weigh yield alongside the earnings multiple |
A note on Dividend Yield: Dividend Yield = Annual Dividend Per Share divided by Current Share Price, expressed as a percentage. For PSU stocks like Coal India or Power Grid that return a large share of earnings to investors as dividends, yield is a meaningful input when assessing whether the stock is priced attractively for an income-focused investor.
How to Check These Ratios on Alice Blue
You do not need a separate tool or subscription to check valuation ratios for Indian stocks. The Alice Blue trading platform displays PE, PB, and EV/EBITDA for every NSE and BSE-listed company within the stock research section.
- Log in to your Alice Blue account
- Search for any stock using the search bar
- Open the stock detail page and navigate to the fundamentals or research tab.
- PE, PB, EV/EBITDA, and other key ratios appear alongside the company’s financial summary.
- Compare the current ratio against the company’s historical average to understand whether the stock is cheap or expensive relative to its own track record.
If you do not have an Alice Blue account yet, you can open one and access the full research platform at aliceblueonline.com.
Mistakes That Beginner Investors Commonly Make
- Applying PE across sectors. A PE of 20x for HUL and a PE of 20x for NTPC represent completely different situations. Growth expectations, capital intensity, and competitive dynamics are different. Cross-sector PE comparisons almost always mislead.
- Buying because the ratio looks low. A low PE or PB is not a thesis on its own. The ratio is low for a reason. Sometimes that reason is temporary, and the stock is genuinely mispriced. Sometimes the business is in structural decline, and the low ratio is exactly where it should be. The reason behind the number matters far more than the number itself.
- Skipping debt when reading PE. Two companies with the same PE and identical earnings are not the same investment if one carries negligible debt and the other has years of heavy interest payments ahead. EV/EBITDA corrects for this and should always be run alongside PE when debt is a factor.
- Treating trailing earnings as forward guidance. If a company’s profits fell sharply in the last quarter, the trailing PE will look stretched even if the stock price has already corrected. Always check whether the EPS used to calculate the ratio reflects what the business is likely to earn over the next 12 months, not just what it reported last year.
- Stopping at one ratio. PE shows one dimension. EV/EBITDA shows another. PEG shows a third. Investors who cross-check at least two or three metrics before forming a view are working from a much more complete picture than those who screen on PE alone.
Who Gets the Most Value From These Metrics
Investors building a long-term equity portfolio in India who want to understand whether they are buying a quality business at a fair price rather than simply chasing a stock that has recently moved.
Beginners learning fundamental analysis who need a structured starting point before they move into reading annual reports, cash flow statements, and management commentary.
Anyone who reads equity research reports or watches market commentary and wants to understand what analysts mean when they say a stock is “trading at a discount to its historical PE” or “looking stretched on EV/EBITDA.”
Intraday and short-term momentum traders who make decisions based on price action and volume will find limited use for these ratios in their day-to-day process. These metrics are built for investors evaluating a business before buying and holding it, not for managing positions across hours or days.
Conclusion
Pull up any three stocks from your watchlist on Alice Blue. Check their PE, PB, and EV/EBITDA in the research section. Compare those numbers against the sector average and against the company’s own 5-year historical range. Then ask yourself one question: why is this stock trading at a premium or discount to its peers? That question, and the work you do to answer it, is where real stock analysis begins. These ratios do not decide for you. They give your judgment something concrete to work with.
Frequently Asked Questions
Blog by Aliceblue News Desk
