Is Arrow Financial Corp. overvalued or undervalued?

As of 1 May 2025, Arrow Financial Corp. has moved from a fair to an expensive valuation grade. The company appears to be overvalued based on its P/E ratio of 20, which is higher than the fair valuations of its peers such as The First Bancshares, Inc. with a P/E of 13.19 and First Financial Corp. at 14.27. Additionally, Arrow's Price to Book Value stands at 1.38, and its EV to EBITDA is 7.58, both indicating a premium compared to its industry counterparts.
In terms of performance, Arrow Financial Corp. has shown mixed results against the S&P 500, with a year-to-date return of 3.80% compared to the index's 12.22%, and a one-year return of 0.71% versus 17.14% for the S&P 500. This underperformance reinforces the notion that the stock may not justify its current valuation amidst a backdrop of stronger returns from the broader market.