Is Avis Budget Group, Inc. overvalued or undervalued?

As of 1 November 2021, the valuation grade for Avis Budget Group, Inc. changed from fair to risky, indicating a potential concern regarding its valuation. The company appears to be overvalued, particularly when considering its P/E ratio of 31, which is significantly higher than peers like Blue Owl Capital Corp. with a P/E of 10.91 and Credit Acceptance Corp. at 13.56. Additionally, Avis Budget's EV to EBITDA ratio stands at 16.05, while its peers show more favorable valuations, such as Credit Acceptance Corp. at 3.08.
The company's return metrics also highlight its mixed performance; while it has achieved a year-to-date return of 93.43% compared to the S&P 500's 12.22%, its three-year return of 5.85% lags behind the S&P 500's 70.41%. This discrepancy suggests that despite strong short-term gains, the long-term outlook may be less favorable, reinforcing the view that Avis Budget Group is currently overvalued.