News

This is a Mint Premium article gifted to you. Subscribe to enjoy similar stories.

When markets swing wildly every other day,many investors rush to sell. That's when value investors step in to scoop up quality stocks at bargain prices.

Sounds simple, right? Not always.

While the strategy may sound straightforward, it comes with risks. Misjudging value opportunities can lead to investing in value traps. These are stocks that seem attractive at first but continue to underperform because the issues pulling their prices down aren't temporary.

That’s where the PEG ratio can be useful.

The PEG ratio, or price/earnings to growth ratio, is a valuation metric that helps investors assess if a stock is undervalued or overvalued by considering both its current earnings and its expected future growth.

It builds upon the traditional P/E ratio by incorporating the company's growth rate, making it particularly useful for comparing companies with different growth rates.

The PEG ratio is calculated by dividing a company's P/E ratio by its earnings per share (EPS) growth rate.

A lower PEG ratio suggests that a stock may be undervalued, while a higher PEG ratio may indicate overvaluation.

A PEG ratio of 1 is often used as a benchmark, suggesting that a stock is fairly valued relative to its growth rate.

In this article, we will look at stocks with PEG ratios less than 1.

Natco Pharma stock has with a PEG ratio of 0.07, which suggests it's trading at a large discount relative to its earnings growth potential.

The company creates, produces and sells intermediates, active pharmaceutical ingredients (APIs), and finished dosage formulations (FDFs).

Natco Pharma has carved out a niche in the pharmaceutical space, excelling in generics, oncology, and complex drugs. It serves both domestic and international markets with nine manufacturing and research facilities across India. The company sells its products in more than 50 countries, with the US, India, Canada and Brazil as its main markets.

Sales and net profit have increased ana a compound annual growth rate (CAGR) of 24.9% and 46.4%, respectively. In the coming years it plans to strengthen its core business and expand globally. It expects to capture one-third of the Revlimid market allocation in FY26, which would contribute significantly to revenues. The crop health sciences division aims for ₹130-140 crore of revenue and breakeven for FY26.

The company aims to expand its presence in emerging markets and Canada while preparing for seven or eight key oncology product launches. It also plans to introduce injectable semaglutide in India by March 2026, subject to regulatory approvals.

Sagility India stock has a PEG ratio of 0.11. A healthcare-focused business process management company, it provides end-to-end solutions for health insurers, providers, and pharmacy benefit managers, with services such as claims processing, provider data management, and member engagement. The company generates100%of its revenue from the US.

Sagility India has shown impressive momentum in recent years. From FY23 to FY25 the company’s revenue grew at a CAGR of 14.9%, while net profit clocked a CAGR of 93.8%.

Managing director and group CEO Ramesh Gopalan said the company has entered FY26 with strong momentum and confidence in its position as a leading provider of solutions and services for US healthcare customers and providers. He added that the company is strengthening engagement with both long-standing and new clients while maintaining robust profitability.

Zen Technologies stock trades at a PEG ratio of 0.13, a modest valuation for the drone stock with earnings growth factored in.

The company designs and manufactures training simulators, anti-drone systems, and operations for military forces. It products include an anti-drone system, corner shot, driving simulator, live ranges, live simulation, and virtual simulation. It also designs, develops, and manufactures combat training solutions for the training of defence and security forces worldwide.

Zen Technologies has clocked robust financial performance over the years. Over FY23 to FY25 it delivered exceptional growth, with sales rising at a CAGR of 110.9% and net profit expanding at a CAGR of nearly 144.7%.

In June 2025 the company acquired a controlling stake in TISA Aerospace Pvt. Ltd, a young defence-tech firm known for its indigenous UAVs and loitering munitions.

This marked Zen’s diversification beyond its core business of defence training systems and anti-drone solutions. At the end of March the company had an order book of ₹690 crore and was targeting cumulative revenue of ₹6,000 crore over FY26-FY28.

Low-PEG stocks attract investors because they combine the best of both worlds—reasonable valuations and strong earnings growth potential.

However, the PEG ratio has its limits. It doesn’t always capture shifts in growth rates, sector-specific risks, or external factors such as regulations and competition.

That’s why investors should treat it as one piece of a larger puzzle rather than the complete picture. Looking at it alongside metrics such as return on equity, cash flow, debt, and industry outlook gives a far more reliable view.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

Download the Mint app and read premium stories

Log in to our website to save your bookmarks. It'll just take a moment.

You are just one step away from creating your watchlist!

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.

Your session has expired, please login again.

You are now subscribed to our newsletters. In case you can’t find any email from our side, please check the spam folder.

This is a subscriber only feature Subscribe Now to get daily updates on WhatsApp