Value investing has long attracted investors who aim to buy solid businesses at prices that leave room for future upside. One of the most commonly used indicators in this approach is the price-to-earnings (P/E) ratio. When a stock trades below its long-term average or that of its industry peers, it often draws attention as a potential value pick.
But low valuations aren’t always a green signal. Sometimes, they reflect deeper structural issues, such as slowing earnings, weak balance sheets, or sector-specific headwinds. In such cases, the discount could be well-deserved.
With that context in mind, we have identified two stocks currently trading below their 10-year median price-to-earnings (P/E) ratio. The key question: are these undervalued opportunities or value traps waiting to unfold?
#1 Maruti Suzuki
Established in 1981, Maruti Suzuki is a subsidiary of Suzuki Motor Corporation, which holds a 58.2% equity stake in the company. Its strength lies in its ability to offer relevant products, technologies, and services that India needs.
The company is the market leader in passenger vehicles (PVs) in India, with a share of about 42%, and is also India’s largest exporter of PVs. Maruti continues to dominate the mini car segment, with a market share of around 94%, thanks to its Alto and S-Presso models. It also dominates the compact car segment, holding a 66% market share.
The company exports to nearly 100 countries, with Chile, Mexico, Saudi Arabia, South Africa, and the Philippines being the top destinations.
The company has an extensive network of 4,440 total sales outlets and 4,964 service touchpoints. In addition, it has three manufacturing facilities – two in Haryana and one in Gujarat.
In FY24, it recorded its highest-ever annual sales volume of 1.79 million units, including 33,763 units of light commercial vehicles, aided by new product launches. New launches also helped Maruti’s volume grow by 9.5%, outpacing the 8% growth posted by competitors.
Volume growth was led by strong demand for SUVs, in which Maruti has gained strong momentum. SUV Sales grew 119% from last year, driven by four new models. As a result, the company’s market share in the SUV segment increased to 20.8% in FY24, from 12.1% the previous year.
In addition to its net SUV launches, 10 of its models featured in the top 15 best-selling passenger vehicles, helping it outperform its peers. Furthermore, the company launched updated variants of Dzire, Baleno, Swift, Ertiga, and Wagon R, improving its product portfolio. These things combined helped it maintain robust growth.
This support record export of 2.8 lakh vehicles, up 10% from FY23. The company is aligned with India’s ‘Make in India’ vision and is making a concerted effort to increase exports. With this, exports formed 13% of the total sales volume in FY24 — the same as in FY23.
The company’s strong all-around performance led to a 20% rise in net sales in FY24 to ₹1.35 trillion. The operating earnings before interest and tax (EBIT) margin improved 2.6 percentage points to 9.9%. Consequently, its net profit increased massively by 64% to ₹132 billion. The return on equity also improved 4.2 percentage points to 18.3%.
In FY25, however, momentum slowed, with only 4.6% volume growth, due to a broader economic slowdown and higher inflation. However, export volume rose 17.5%, consistent with the broader industry trend.
Still, net sales increased by just 7.5%–lower than the 20% growth seen in FY24. Margins held steady at 10%, while net profit rose just 5.6%, albeit on a higher base.
Looking ahead, demand remains weak in the passenger vehicle segment. The industry is expected to grow modestly by 1-2% in FY26, and Maruti expects to outperform this growth on the back of new launches.
The company has lined up two new launches: the recently unveiled e-Vitara and one more SUV. The company expected the export momentum to sustain, with 20% growth expected in FY26.
From a valuation perspective, Maruti trades at a price-to-earnings multiple of 26.6x, lower than the 10-year median P/E of 37.6x. The company is strategically positioned to play a key role in increasing PV penetration in India in the long run. However, in the short term, growth depends on economic recovery, which could lead to a sales rebound.
Maruti Suzuki Share Price
#2 Cipla
Established in 1935, Cipla is a global pharmaceutical company with a geographically diversified presence. It offers over 1,500 products in 65 therapeutic categories, covering a wide spectrum of diseases. Cipla supplies branded and generic medicines to over 170 countries globally.
Cipla is the third-largest pharmaceutical company in India, with a market share of 5.56%. The Indian pharmaceutical market remains one of the company’s focus areas, both in terms of both sales and profit growth.
The company derives about 43% of its total revenue from India. High-margin chronic and sub-chronic segments contributed 60% to it’s domestic sales on moving annual total (MAT) basis. Its top five therapies together contributed 76.2% to its India sales as of October 2024 on MAT basis.
Cipla has 21 brands in the top 300 brands in the Indian pharmaceutical market. In addition, 26 of its brands generate sales of more than ₹1 billion each, while 11 brands generate revenue of more than ₹2 billion annually.
In addition to India, North America accounts for 30% of the revenue, followed by Africa at 12%, where it is the third-largest player, and 12% from Emerging markets and Europe.
Cipla consolidated sales increased by 13% from last year to ₹257.7 billion. The growth was primarily driven by strong performance in the US business, led by the launch of generic Revlimid and albuterol. The Indian business also contributed, supported by both branded prescription and trade generic businesses.
Gross margin expanded to 65.8% in FY24, up from 63.7% in FY23. This led to an EBITDA margin expanding to 24.4% from 22.1%, driven by contributions from high-value products in the US market, favourable business mix, price increases, and a decline in input costs.
In 9MFY25, growth slowed, with revenue increasing just 6.2% from the same period last year to ₹208 billion, due to subdued growth in both domestic and international markets.
However, the EBITDA margin improved by 1.4 percentage points to 26.8%, led by an improved product mix and lower price erosion in the US market. Nonetheless, net profit increased by 27% to ₹40 billion due to lower input costs and operational efficiencies.
Looking ahead, Cipla has a strong pipeline of launches. 112 abbreviated new drug applications (ANDAs) were pending for approval from the United States Food and Drug Administration (USFDA).
Research & Development spending, primarily directed at strengthening its ANDA pipeline, accounted for around 6.1% of overall revenue in FY24, up from 5.9% the previous year.
Cipla continues to focus on the specialty and complex generic segment, particularly respiratory, central nervous system, and critical care therapies. The company aims to be the world’s largest player in inhaled medicines and is executing a strong pipeline of respiratory assets in the U.S.
It is also leveraging artificial intelligence to enhance research and early discovery. Generative AI is expected to unlock $80 billion to $110 billion in annual value across the pharmaceutical industry value chain.
The next major opportunity lies in obesity treatment, led by GLP-1 drugs, with the market expected to grow at a 21% CAGR, and in oncology, which is expected to grow at a 13% CAGR by 2031.
From a valuation perspective, Cipla trades at a price-to-earnings multiple of 25x, lower than the 10-year median P/E of 31x. A rise in healthcare spending, a focus on complex generics, and a strong US pipeline could act as catalysts for the stock.
Cipla Share Price
Conclusion
Both Maruti and Cipla are trading below their 10-year median P/E ratios, making them interesting candidates from a valuation lens. Maruti’s strength lies in its market leadership, product pipeline, and growing export base, while Cipla benefits from strong domestic footing, U.S. generics pipeline, and margin gains from high-value products.
However, recent growth moderation in both companies is a thing to watch. Whether these are value opportunities or traps depends on how well they execute on upcoming launches and maintain earnings momentum.
Disclaimer
Note: We have relied on data from throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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