Four midcap stocks near 52-week highs that still look cheap | Stock Market News

Most investors treat a 52-week high as a warning. The reasoning seems obvious: a stock near its yearly peak has already run up, the easy money has been made, and buying now means paying close to the highest price anyone has paid in 12 months.

Value hunters instinctively look at the other end of the list. That instinct is usually right, but it can miss a specific and potentially profitable situation.

A share price and a valuation multiple can move independently. The price is the numerator; earnings and book value sit underneath it.

When profits grow faster than the share price, the multiple contracts even as the stock climbs. The company becomes more valuable and, at the same time, cheaper.

With that context, here are four midcap undervalued stocks. All four currently trade below their historical price-to-earnings or price-to-book ratios and are within roughly 5% of their 52-week highs.

AU Small Finance Bank began in 1996 as AU Financiers, a Rajasthan-based vehicle-finance NBFC, and converted into a small finance bank in 2017.

It now offers a full retail banking suite, including deposits, home and vehicle loans, credit cards and wealth products. Retail banking accounts for roughly three-quarters of its business.

The stock has risen about 41.6% over the past year to ₹1,087.60, against a 52-week high of ₹1,105.90.

Yet its valuation has compressed because profits have grown faster.

FY26 net profit rose 25.4% to ₹2,640 crore from ₹2,110 crore in FY25. The June 2026 quarter delivered earnings per share of ₹28.32, while analysts expect profit to compound at 35% annually between FY26 and FY28.

At 3.78 times book value, AU trades at a substantial premium to the banking-sector median of about 1.32 times. So it is cheap only relative to its own history, not its peers.

Its three-year average return on equity of 13.9% is also modest for the multiple.

Small finance banks additionally lend to riskier borrower segments, meaning asset quality can deteriorate quickly if economic conditions weaken.

Lloyds Metals & Energy is an integrated iron ore mining and steel company based in Chandrapur, Maharashtra.

What sets it apart from many steel companies is its captive iron ore supply. Its mining capacity has been scaled to 10 million tonnes a year, providing some insulation from raw-material price swings that affect competitors buying ore on the open market.

The company has been expanding rapidly. It commissioned a 1.2 million-tonne DRI plant at Ghughus, an 85-km slurry pipeline from Hedri to Konsari with 10 million tonne capacity, and two 4 million tonne pellet plants at Konsari, the second of which began operations in May.

It has also entered copper, commencing commercial production of copper cathodes at Surya Mines in the Democratic Republic of Congo.

The earnings response has been dramatic. Net profit in the March 2026 quarter jumped 603% year-on-year to ₹1,420 crore on revenue of ₹6,000 crore. Full-year revenue reached roughly ₹17,300 crore, while net profit stood at ₹3,810 crore.

The stock is up 76.77% from its 52-week low and trades at ₹2,054.50, against a high of ₹2,100.

Despite that run, its price-to-earnings ratio is 30.2 times—lower than might be expected for a company growing at this pace, precisely because earnings have grown faster than the share price.

There are, however, two important caveats. The stock trades at 8.34 times book value, which is expensive by any absolute measure. Promoter holding also declined 2.08% in the most recent quarter, which warrants attention.

Steel and iron ore remain cyclical businesses, and a 603% profit jump creates a much tougher base for future growth.

Once known as Sona Comstar, Sona BLW Precision Forgings is one of the purer listed plays on the global shift towards electric vehicles.

Sona makes precision-engineered drivetrain components, including differential gears and starter motors, as well as traction motors and e-axles for electric vehicles.

It supplies seven of the world's top 10 passenger-vehicle makers from 12 plants across India, the US, Mexico and China.

At around ₹150.75, the stock is roughly 3% below its 52-week high of ₹155.25 and up about 68% from its 52-week low of ₹89.70.

Earnings have supported the move. Consolidated net profit rose about 42% year-on-year in the March 2026 quarter to ₹1,500 crore, and 46% sequentially.

Profit has increased for four consecutive quarters, from ₹510 crore to ₹1,500 crore, while revenue has grown for six straight quarters.

Sona ended FY26 with a record net order book of about ₹23,700 crore, roughly two-thirds of it for electric-vehicle programmes, providing multi-year revenue visibility.

The company is targeting EVs to account for half its revenue by FY27 and is also diversifying into railways and robotics.

But at roughly 39 times earnings, Sona is not cheap in absolute terms, while its three-year average return on equity of 11.6% is modest.

The global EV market has also been volatile. Battery-electric vehicle sales declined in some quarters of FY26, while a high-profile order with China's BYD was cancelled. Promoter holding has also fallen substantially over the past three years.

Last is the steadiest business of the four. Alkem is India's fifth-largest pharmaceutical company and holds the top position in the Indian trade-generics market—a valuable franchise built over more than five decades.

It develops and sells branded generics, generic drugs, active pharmaceutical ingredients and nutraceuticals across areas including anti-infectives, pain management, cardiac care, diabetology, gynaecology, neurology and dermatology.

The stock trades around ₹5,600, against a 52-week high of ₹5,933.50, and is up roughly 14.9% over the past year.

Alkem trades at about 28 times earnings. For context, the stock reached an all-time high of ₹6,440 in September 2024 before correcting sharply to ₹4,500. It has spent the period since rebuilding.

Its current multiple is below the levels at which this franchise has historically traded.

The operating recovery has been real. Profit before exceptional items and tax jumped 40.74% year-on-year in the March 2026 quarter.

In the June quarter, net profit rose 22% to ₹660 crore on revenue of ₹3,510 crore, while Ebitda increased 21%.

Management expects the India business to outpace Indian pharmaceutical-market growth by 100 to 150 basis points. The company declared a final dividend of ₹10 per share and pays out roughly 28% of profit.

There are risks, however. Alkem's chief executive resigned in April 2026, while its Taloja contract-research facility underwent an unannounced USFDA inspection in May 2026—a recurring regulatory risk for Indian pharmaceutical exporters.

A rising share price does not automatically mean a rising valuation. When earnings grow faster than the price, the multiple contracts and a stock can become cheaper even as it climbs.

Some of the best value is created by businesses that are performing, rather than businesses that are struggling.

But three cautions belong alongside that argument.

First, cheap relative to history is not the same as cheap.

Second, a historical average is meaningful only if the business has not fundamentally changed. If its growth rate, competitive position or capital intensity has shifted permanently, its old multiple may no longer be a fair benchmark. The stock may simply have been repriced correctly.

Third, and most importantly, investors should examine what is driving the earnings.

Comparing a company with its own history can be a sensible valuation framework because it recognises that different businesses deserve different multiples. Used carelessly, however, it can become a way of justifying a high price for anything that has come off a peak.

Investors should evaluate each company's business quality, financial performance, management execution, corporate governance and valuation before drawing any investment conclusions.

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

Equitymaster is India's leading independent equity research platform, providing in-depth research and analysis on BSE- and NSE-listed companies since 1996. As a SEBI-registered Research Analyst [Registration No. INH000021128], Equitymaster covers the full spectrum of Indian equities — bluechip stocks, midcap stocks, smallcap stocks, and microcap stocks.<br><br> At the heart of Equitymaster's research philosophy are the principles of value investing — particularly the margin of safety and the primacy of investment over speculation. All research is produced by an independent team of SEBI-registered research analysts with vast experience in Indian financial markets, using detailed systems and processes developed entirely in-house.<br><br> With over 17 lakh readers across 72 countries, Equitymaster is one of India's leading equity research publications. Since 1996, the goal has remained the same — to deliver honest, unbiased, and credible equity research that helps Indian investors make better, more informed decisions.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.