Investing in stocks requires understanding financial statements and key ratios. In this article, we will analyze Zomato Ltd in detail using its financial data. This guide is written in simple Indian English for beginners so they can learn about investing and make informed decisions.
1. Basic Company Overview
Stock Name: Zomato Ltd
Current Market Price (CMP): Rs. 206.30
Market Capitalization: Rs. 1,99,086.73 crore
Price-to-Earnings Ratio (P/E): 300.28
Return on Equity (ROE): 1.12%
Debt-to-Equity Ratio: 0.05
5-Year Sales Growth: 55.97%
5-Year Profit Growth: 16.04%
Debt to Profit Ratio: 3.30
Days Receivable: 23.92 days
CMP to Sales Ratio: 11.08
Earnings Per Share (EPS) for 12 Months: Rs. 0.75
Interest Coverage Ratio: 7.45
2. Key Financial Ratios Explained
(a) Price-to-Earnings Ratio (P/E) - 300.28
What it means? The P/E ratio tells how much investors are willing to pay for each rupee of the company’s earnings. A high P/E of 300.28 means investors expect high growth from Zomato in the future, but it also indicates the stock is expensive.
Investment Awareness: Compare P/E with industry peers. High P/E means high expectations, but if growth does not meet expectations, the stock price can fall.
(b) Market Capitalization - Rs. 1,99,086.73 crore
What it means? Market capitalization is the total value of a company’s shares in the stock market. It helps classify stocks:
Large-cap: Above Rs. 50,000 crore
Mid-cap: Rs. 10,000 crore - Rs. 50,000 crore
Small-cap: Below Rs. 10,000 crore
Zomato is a large-cap company, meaning it is well-established but may not grow as fast as small companies.
(c) Return on Equity (ROE) - 1.12%
What it means? ROE measures how efficiently the company generates profits from shareholders’ money. Higher ROE = better efficiency.
Zomato’s ROE is only 1.12%, meaning it generates very low profit from shareholders’ equity. Ideally, ROE should be above 15% for a strong business.
(d) Debt-to-Equity Ratio - 0.05
What it means? This ratio shows how much debt the company has compared to its equity. Zomato’s debt-to-equity is 0.05, meaning it has very low debt, which is a positive sign.
Investment Awareness: Companies with low debt are less risky and have better financial stability.
(e) 5-Year Sales Growth - 55.97%
What it means? This tells how much Zomato’s revenue has grown in the last 5 years. A high sales growth rate (55.97%) is a positive indicator that the company is expanding rapidly.
Investment Awareness: Always check if high sales growth is leading to profit growth.
(f) 5-Year Profit Growth - 16.04%
What it means? While sales have grown, profit growth is only 16.04%, meaning expenses are increasing.
Investment Awareness: If a company is not turning sales into profits, it can struggle in the future.
(g) Debt-to-Profit Ratio - 3.30
What it means? This shows how much debt the company has compared to its profit. A ratio of 3.30 means Zomato’s debt is 3.3 times its profit, which is manageable.
Investment Awareness: A lower ratio (below 3) is preferred for financial stability.
(h) Days Receivable - 23.92
What it means? It takes 24 days on average for Zomato to collect money from its customers. Lower days receivable means faster cash flow.
Investment Awareness: If this number rises, it could mean customers are delaying payments, which is a red flag.
(i) EPS (Earnings Per Share) - Rs. 0.75
What it means? EPS shows how much profit is earned per share. Zomato’s EPS of 0.75 is low, meaning profits are not very high yet.
Investment Awareness: Higher EPS is better for shareholders, and growing EPS attracts investors.
(j) Interest Coverage Ratio - 7.45
What it means? This ratio tells how easily a company can pay its interest expenses. Above 5 is considered safe.
Zomato’s 7.45 shows it can easily cover its interest payments, meaning it is not struggling with debt.
3. Zomato’s Financial Performance (Year-wise Data)
| Year | Sales (Rs. Crores) | Net Profit (Rs. Crores) |
|---|---|---|
| 2018 | 466 | -107 |
| 2019 | 1,313 | -1,010 |
| 2020 | 2,605 | -2,386 |
| 2021 | 1,994 | -816 |
| 2022 | 4,192 | -1,222 |
| 2023 | 7,079 | -971 |
| 2024 | 12,114 | 351 |
| TTM | 17,972 | 663 |
Source:zomato
Sales have grown massively, but profits have only turned positive recently.
Investors should watch if Zomato can maintain profitability in the coming years.
4. Upcoming Quarter Result Prediction
Based on the financial data, Zomato’s sales and profit trends suggest continued growth. If the current pace continues:
Expected Revenue for the Next Quarter: Around Rs. 5,500 - 6,000 crore
Expected Net Profit: Rs. 250 - 350 crore
EPS Projection: Likely to increase above Rs. 1.00
Factors Affecting Growth:
✅ Increase in online food ordering & quick commerce ✅ Expansion of Blinkit services ❌ Rising competition from Swiggy and ONDC ❌ Possible slowdown in order volume due to inflation
5. Final Thoughts: Should You Invest in Zomato?
📌 Zomato as an Investment
Zomato is a growth stock, meaning its focus is on expansion over immediate profits. The company has shown strong sales growth, but its profitability is still in the early stages. Investors must analyze its ability to sustain profits while growing its market share.
✅ Strengths (Why You May Consider Investing)
Rapid Revenue Growth 📈 – Sales have increased significantly from Rs. 466 Cr in 2018 to Rs. 17,972 Cr (TTM, 2024).
Low Debt 💰 – With a Debt-to-Equity ratio of 0.05, financial stability is strong.
Profitability Turnaround 🏆 – After years of losses, Zomato posted a profit of Rs. 663 Cr (TTM, 2024).
Industry Leader 🍽️ – It dominates the food delivery sector and is expanding its Blinkit (quick commerce) business.
Growing Digital Economy 🌍 – India’s increasing internet penetration benefits Zomato’s business model.
❌ Weaknesses (Why You Should Be Cautious)
Extremely High Valuation ⚠️ – A P/E ratio of 300.28 makes it an expensive stock.
Thin Profit Margins 🏦 – Even after reaching profitability, net margins are still low compared to other tech firms.
Competition Risk 🏁 – Swiggy, ONDC, and new entrants may reduce Zomato’s market share.
Stock Price Volatility 📊 – Growth stocks like Zomato can have large price fluctuations, making it risky for conservative investors.
🔮 Future Prediction & Investment Advice
If Zomato maintains profitability, the stock can perform well in the long run.
Short-term risks (competition, valuations) make it unsuitable for low-risk investors.
Long-term investors can accumulate on dips, but only with high risk tolerance.
