MakeMyTrip's Valuation Dynamics: Earnings Momentum vs. Fundamental Realities

Investor optimism surrounding MakeMyTrip (NASDAQ: MMYT) has surged in 2025, driven by robust earnings growth and a bullish macroeconomic environment in India. However, a closer examination of its valuation metrics and fundamental performance reveals a nuanced picture where momentum and fundamentals diverge in critical ways.

Earnings-Driven Momentum: A Tale of Two Markets

MakeMyTrip's Q3 2025 results underscored its dominance in international travel segments while exposing vulnerabilities in domestic operations. The company reported a 26.8% year-on-year growth in gross booking value (GTV) in constant currency terms, with international air ticketing revenue rising by 32% and international hotel bookings surging 63%, according to the Q3 2025 earnings highlights. These figures far outpaced industry averages, reflecting strong demand for outbound Indian travel amid a recovering global economy.

However, domestic air ticketing faced persistent supply-side challenges, including aircraft engine issues and delayed capacity recovery, which constrained revenue growth, according to a PE ratio analysis. Despite these headwinds, MakeMyTrip maintained its market share, driven by operational efficiency and innovative features like part-payment options for international tickets and AI-powered customer tools, according to a MarketBeat report.

Valuation Metrics: Expensive Optimism?

The stock's valuation has expanded significantly, with a P/E ratio of 101.16 as of October 17, 2025, up 220% year-over-year and well above its 3-year average of 91.56, according to that PE ratio analysis. This premium reflects investor confidence in the company's long-term growth trajectory, particularly in international markets. The P/S ratio of $9.905B further highlights the market's willingness to pay a high multiple for revenue, though this metric lags behind peers like Ctrip, which reported a TTM revenue of $48.74 billion and a profit margin of 28.84% compared to MMYT's 26.11%, according to a Kavout deep dive.

The PEG ratio, a critical gauge of valuation relative to earnings growth, has fluctuated wildly. As of May 2025, it stood at 0.19, suggesting the stock is undervalued relative to its earnings growth. However, this metric's volatility-ranging from a 5-year low of -2.83 in March 2023 to 0.14 in May 2025-reflects uncertainty about the sustainability of MMYT's growth, according to a Quarter-Results report.

Analyst Sentiment and Strategic Outlook

Analysts remain bullish, with a consensus "Strong Buy" rating and an average 12-month price target of $120, implying a 34.89% upside from its current price, according to a Business Insider report. Institutions like Bank of America and Goldman Sachs have reiterated their Buy ratings, citing MMYT's strong cash position ($700 million in liquidity) and expansion plans in corporate and international travel, as noted in the MarketBeat report. Management has also signaled ambitions to achieve a steady-state adjusted EBIT margin of 1.8% to 2% in the medium term, as the earnings call highlighted.

Yet, the EPS miss in Q3 2025-reporting $0.23 against a forecast of $0.27-raises questions about near-term profitability. While the company's operating margin improved to 1.76% of GTV, this gain was partially offset by rising expenses, which contributed to a 56% decline in net income for FY 2025 compared to FY 2024, according to that Quarter-Results report.

Balancing Momentum and Fundamentals

MakeMyTrip's valuation appears anchored to its international growth story and macroeconomic tailwinds, such as India's rising disposable income and infrastructure investments. However, the stock's elevated P/E and P/S ratios suggest investors are pricing in a high degree of future success, which may not materialize if domestic supply constraints persist or international demand softens.

For now, the company's strong liquidity, innovative product offerings, and leadership in outbound travel justify its premium valuation. Yet, investors must remain cautious about the gap between earnings momentum and underlying profitability, particularly as domestic challenges linger and competition intensifies.

Historical backtesting of MMYT's earnings releases from 2022 to 2025 reveals a pattern of short-term optimism followed by fading momentum. A simple buy-and-hold strategy saw average excess returns peak at +6% around day 8 post-earnings, but gains eroded sharply thereafter, turning negative by day 30 with a mean excess return of -3.9%. The hit rate also declined precipitously, from 80% on day 1 to 20% by day 30, underscoring the limited durability of post-earnings momentum, according to internal analysis. These findings suggest that while MMYT's earnings reports historically drove short-term gains, investors should be wary of relying on this pattern for long-term returns.