Two Stocks That Could Deliver Strong Growth at Attractive Prices—Time to Buy?
Picking the right stocks is never easy for investors across sectors.
- It demands careful evaluation of financial performance,
- scrutiny of valuations, and
- close attention to quarterly results.
Even after diligent research, success is never guaranteed, as distinguishing between a high-quality company and a high-growth investment remains a common challenge.
- A strong balance sheet does not automatically mean growth potential exists.
With this in mind, we have identified two companies—Affle and AU Small Finance Bank—that offer a rare combination of quality, growth, and attractive valuations.
Affle (India): Riding the Digital Advertising Wave
Affle (India) is a global technology company specializing in consumer recommendations and mobile advertising for leading B2C brands.
- Its proprietary consumer intelligence platform reaches 3.3 billion connected devices worldwide.
Affle’s strength lies in its patent portfolio, with nine patents granted and 27 pending across fields like digital advertising, AI, and voice intelligence.
- It operates across both emerging and developed markets, with 74% of revenue from emerging regions.
The company’s CPCU model (Cost Per Converted User) drives revenue through user acquisition, engagement, and transaction-led campaigns.
- It also generates revenue via brand awareness projects.
Affle’s financials are robust:
- Revenue grew at a 53% CAGR from FY20 to FY24, reaching ₹18.4 billion.
- Net profit grew at 46% CAGR, touching ₹2.9 billion in FY24.
- EBITDA expanded at 23% CAGR, maintaining stable 20% margins.
Other impressive metrics:
- ROE stands at 17%, while ROCE is at 16.5%, showcasing efficient capital utilisation.
- Converted users rose 22%, while CPCU rates increased 10% to ₹56.20, driving a 33.5% surge in CPCU revenue.
Growth drivers ahead:
- Innovation focus through Optics AI and CTV AI, enhancing personalization and scaling advertising for SMBs.
- Plans to grow revenue at 25–30% CAGR over the next five years by deepening market penetration.
Valuation:
- The stock trades at a PE of 62x, an 8% discount to its five-year median PE of 67x.
AU Small Finance Bank: Retail Lending Powerhouse
Founded in 1996 as an NBFC and later becoming a bank in 2017, AU Small Finance Bank has a presence across 2,456 banking touchpoints, serving over 11.3 million customers.
- Its strength lies in its geographical diversification, with a heavy focus on North India.
Loan Book Highlights:
- Retail secured loans form ₹766 billion, earning a 14% yield.
- Commercial banking loans add ₹242 billion, yielding 11.1%.
Performance metrics:
- Retail portfolio grew at a 25% CAGR over 5 years,
- Commercial portfolio grew at 37% CAGR from a low base.
Despite a strong operational backdrop, rising NPAs present challenges:
- Net NPAs rose to 0.74% while Gross NPAs stood at 2.26%.
- Credit costs increased, yet RoA remained stable at 1.5%, and RoE only slightly dipped to 13.1%.
Recent financials:
- Interest income surged 52% to ₹160.6 billion in FY25.
- Net interest margin improved to 5.9%,
- Cost-to-income ratio fell to 57%, reflecting improved operational efficiency.
Future initiatives:
- Focused on growing the CASA ratio, targeting a 1-1.5% increase.
- Plans to make 65% of branches profitable and maintain a cost-to-income ratio below 60%.
- Targeting a RoA of 1.8% by FY27.
Valuation:
- The stock trades at a price-to-book (P/B) ratio of 3x, a 45% discount to its 7-year median P/B of 5.5x.
Conclusion: Quality Meets Growth
Both Affle and AU Small Finance Bank emerge as fundamentally strong players in high-growth industries.
- Affle benefits from the surging digital advertising sector,
- while AU SFB taps into India’s underpenetrated credit markets.
Affle’s scalable CPCU model, strong client metrics, and continuous innovation focus position it for future leadership.
- Meanwhile, AU SFB’s diversified retail and commercial lending book, improving margins, and universal banking ambitions could act as major growth triggers.
While their business models differ, both offer a combination of growth potential, financial strength, and reasonable valuations, making them attractive candidates for investors seeking quality investments.
However, investors should conduct thorough due diligence before making any decisions, as market dynamics and company-specific factors can change rapidly.
