{"id":15025,"date":"2026-06-28T10:23:00","date_gmt":"2026-06-28T10:23:00","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?p=15025"},"modified":"2026-06-11T10:24:04","modified_gmt":"2026-06-11T10:24:04","slug":"pe-vs-pb-vs-ev-ebitda-stock-valuation","status":"publish","type":"post","link":"https:\/\/lemonn.co.in\/blog\/finance\/pe-vs-pb-vs-ev-ebitda-stock-valuation\/","title":{"rendered":"P\/E vs P\/B vs EV\/EBITDA vs ROIC: When Each Stock Valuation Metric Actually Matters"},"content":{"rendered":"
\"P\/E<\/figure>\n\n\n

Why One Metric Is Never Enough<\/strong><\/h3>\n\n\n\n

Each stock valuation metric captures a different dimension of a company’s value. A single metric can be misleading \u2014 a low P\/E stock may be cheap because earnings are about to collapse; a high P\/E stock may be cheap relative to its growth rate. Sophisticated investors triangulate across multiple metrics to build conviction.<\/p>\n\n\n\n

Price-to-Earnings (P\/E)<\/strong><\/h3>\n\n\n\n
Aspect<\/strong><\/th>Detail<\/strong><\/th><\/tr><\/thead>
Formula<\/td>Market Price \/ Earnings Per Share<\/td><\/tr>
Best for<\/td>Profitable companies with stable earnings: FMCG, IT, banks (with some adjustment)<\/td><\/tr>
Watch out for<\/td>Cyclical stocks at earnings peak (seems cheap but earnings will fall); loss-making companies (no P\/E)<\/td><\/tr>
India benchmark<\/td>Nifty 50 trades at 20\u201325x historically; below 18x = cheap; above 28x = expensive<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Price-to-Book (P\/B)<\/strong><\/h3>\n\n\n\n
Aspect<\/strong><\/th>Detail<\/strong><\/th><\/tr><\/thead>
Formula<\/td>Market Price \/ Book Value per Share<\/td><\/tr>
Best for<\/td>Banks, NBFCs, holding companies (asset-heavy)<\/td><\/tr>
Watch out for<\/td>Intangible-heavy businesses (IT, FMCG) have low book value \u2014 P\/B seems high but is misleading<\/td><\/tr>
India benchmark<\/td>Banks: 1x\u20133x is reasonable; PSU banks at 0.5\u20131x P\/B may signal deep value or structural problem<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

EV\/EBITDA<\/strong><\/h3>\n\n\n\n
Aspect<\/strong><\/th>Detail<\/strong><\/th><\/tr><\/thead>
Formula<\/td>Enterprise Value \/ EBITDA (Earnings before interest, tax, depreciation)<\/td><\/tr>
Best for<\/td>Capital-intensive companies; comparing companies with different debt levels; M&A analysis<\/td><\/tr>
Watch out for<\/td>High depreciation businesses (capex-heavy) may look cheap on EV\/EBITDA but actual cash returns are lower<\/td><\/tr>
India benchmark<\/td>Consumer discretionary: 15\u201325x; IT services: 12\u201320x; Infrastructure\/Utilities: 8\u201315x<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

ROIC (Return on Invested Capital)<\/strong><\/h3>\n\n\n\n

ROIC = EBIT(1-tax) \/ (Equity + Debt – Cash). ROIC tells you how much return the company generates on all capital invested. A company with ROIC consistently above 15% and growing is allocating capital excellently. ROIC above its cost of capital (WACC) = value creation. Below WACC = value destruction. This is the single most important metric for evaluating management quality.<\/p>\n\n\n\n

Sector-Specific Metric Cheatsheet<\/strong><\/h3>\n\n\n\n
Sector<\/strong><\/th>Primary Metric<\/strong><\/th>Secondary Metric<\/strong><\/th>Avoid<\/strong><\/th><\/tr><\/thead>
Banks\/NBFCs<\/td>P\/B + ROE<\/td>NIM, NPA%<\/td>P\/E (distorted by provisioning)<\/td><\/tr>
IT Services<\/td>P\/E + EV\/EBITDA<\/td>Revenue growth, EBIT margin<\/td>P\/B (low book value misleads)<\/td><\/tr>
FMCG<\/td>P\/E + EV\/EBITDA<\/td>Gross margin, volume growth<\/td>P\/B (brand value not on balance sheet)<\/td><\/tr>
Infrastructure\/Utilities<\/td>EV\/EBITDA<\/td>Order book, D\/E<\/td>P\/E (depreciation distorts)<\/td><\/tr>
Real Estate<\/td>NAV premium\/discount<\/td>Pre-sales, collections<\/td>P\/E (accounting doesn’t reflect cash)<\/td><\/tr>
Capital Goods<\/td>P\/E + Order book to sales<\/td>ROCE<\/td>EV\/EBITDA alone<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"

Why One Metric Is Never Enough Each stock valuation metric captures a different dimension of a company’s value. A single metric can be misleading \u2014 a low P\/E stock may be cheap because earnings are about to collapse; a high P\/E stock may be cheap relative to its growth rate. Sophisticated investors triangulate across multiple […]<\/p>\n","protected":false},"author":15,"featured_media":15026,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_ayudawp_aiss_exclude":false,"_ayudawp_aiss_summary":"Each stock valuation metric captures a different dimension of a company's value. A single metric can be misleading \u2014 a low P\/E stock may be cheap because earnings are about to collapse; a high P\/E stock may be cheap relative to its growth rate. ROIC tells you how much return the company generates on all capital invested.","_ayudawp_aiss_summary_provider":"extractive","_ayudawp_aiss_summary_hash":"4395c049220fca0c5cb163566d2d1c887cf339af","footnotes":""},"categories":[1],"tags":[],"class_list":["post-15025","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"blocksy_meta":[],"uagb_featured_image_src":{"full":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters.png",768,512,false],"thumbnail":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters-150x150.png",150,150,true],"medium":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters-300x200.png",300,200,true],"medium_large":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters.png",768,512,false],"large":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters.png",768,512,false],"1536x1536":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters.png",768,512,false],"2048x2048":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters.png",768,512,false],"web-stories-poster-portrait":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters-640x512.png",640,512,true],"web-stories-publisher-logo":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters-96x96.png",96,96,true],"web-stories-thumbnail":["https:\/\/lemonn.co.in\/blog\/wp-content\/uploads\/2026\/06\/PE-vs-PB-vs-EVEBITDA-vs-ROIC-When-Each-Stock-Valuation-Metric-Actually-Matters-150x100.png",150,100,true]},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/yudh\/"},"uagb_comment_info":0,"uagb_excerpt":"Why One Metric Is Never Enough Each stock valuation metric captures a different dimension of a company’s value. A single metric can be misleading \u2014 a low P\/E stock may be cheap because earnings are about to collapse; a high P\/E stock may be cheap relative to its growth rate. Sophisticated investors triangulate across multiple…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/posts\/15025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/comments?post=15025"}],"version-history":[{"count":1,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/posts\/15025\/revisions"}],"predecessor-version":[{"id":15027,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/posts\/15025\/revisions\/15027"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media\/15026"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=15025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/categories?post=15025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/tags?post=15025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}