Is Ares Commercial Real Estate Corp. overvalued or undervalued?

As of 22 February 2024, the valuation grade for Ares Commercial Real Estate Corp. has moved from very attractive to risky, indicating a significant deterioration in its investment appeal. The company appears to be overvalued, particularly given its Price to Book Value of 0.49 and an EV to EBITDA ratio of 1.49, which are not compelling compared to its peers. Additionally, the company has a negative ROE of -2.46%, further highlighting its financial struggles.
In comparison to its peers, TPG RE Finance Trust, Inc. has a more favorable EV to EBITDA of 2.23 and a P/E ratio of 11.75, while Universal Health Realty Income Trust boasts an impressive EV to EBITDA of 7.60 and a P/E of 31.66. The stark contrast in these valuation metrics suggests that Ares Commercial Real Estate Corp. is not only lagging behind its competitors but also facing challenges that could hinder its future performance. Over the past year, Ares has underperformed significantly, with a stock return of -36.95% compared to the S&P 500's 17.14%, reinforcing the notion that it is currently overvalued.