Is Arrowhead Sepera overvalued or undervalued?

As of 24 October 2025, Arrowhead Sepera's valuation grade has moved from expensive to very expensive, indicating a significant shift in its perceived market value. The company is currently overvalued, with a PE ratio of 40.17, an EV to EBIT of 18.08, and an EV to EBITDA of 17.59. These ratios suggest that the stock is trading at a premium compared to its earnings and cash flow generation capabilities.
In comparison to its peers, Arrowhead Sepera's valuation stands out as particularly high. For instance, Rail Vikas has a PE ratio of 57.64 and an EV to EBITDA of 70.46, while Ircon International, which is rated attractive, has a PE of 23.9 and an EV to EBITDA of 18.98. This stark contrast highlights that Arrowhead Sepera's valuation metrics are not justified by its financial performance, especially given its low ROE of 2.47% and ROCE of 5.50%. Additionally, the company's stock has underperformed the Sensex significantly over the past year, with a return of -45% compared to the Sensex's 5.18%, further reinforcing the overvaluation narrative.