Is Alpha & Omega Semiconductor Ltd. overvalued or undervalued?

As of 6 November 2023, the valuation grade for Alpha & Omega Semiconductor Ltd. has moved from fair to risky, indicating a significant deterioration in its financial outlook. The company appears to be overvalued based on its current metrics, particularly given its negative P/E ratio due to losses, a Price to Book Value of 0.94, and an EV to EBITDA of 16.50. Notably, the Return on Capital Employed (ROCE) and Return on Equity (ROE) are both negative at -2.43% and -2.61%, respectively, highlighting ongoing operational challenges.
In comparison to its peers, Alpha & Omega's valuation metrics are concerning. For instance, Semtech Corp. has a P/E ratio of 89.37, while SMART Global Holdings, Inc. shows a more favorable EV to EBITDA of 8.15. The stark contrast in these ratios suggests that Alpha & Omega is not only underperforming relative to its peers but also carries a higher risk profile. Furthermore, despite a recent uptick in stock performance, with a 1-month return of 17.66% compared to the S&P 500's 3.83%, the overall trend indicates that the company is struggling significantly year-to-date, down 34.13%, reinforcing the view that it is currently overvalued.