Is Alkem Lab overvalued or undervalued?

As of 22 May 2025, Alkem Lab's valuation grade has moved from expensive to fair, indicating a more favorable assessment of its market position. The company is currently fairly valued, with a PE Ratio of 26.83, an EV to EBITDA of 22.70, and a PEG Ratio of 1.99. Compared to its peers, Alkem Lab's valuation stands out; for instance, Sun Pharma has a PE Ratio of 35.25 and Divi's Lab is at 79.33, both categorized as expensive, while Cipla and Dr. Reddy's Labs are seen as attractive with PE Ratios of 22.99 and 19.49, respectively.
Despite the recent downturn in stock performance, with a year-to-date return of -13.31% compared to the Sensex's 5.62%, the valuation metrics suggest that Alkem Lab is positioned reasonably within its industry. The company's ROCE of 19.77% and ROE of 18.07% further reinforce its operational efficiency, supporting the conclusion that Alkem Lab is fairly valued in the current market landscape.