Is Axita Cotton overvalued or undervalued?

As of 12 June 2025, Axita Cotton's valuation grade has moved from fair to very expensive, indicating a significant shift in its market perception. The company is currently overvalued, as evidenced by its exceptionally high PE ratio of 314.73, a Price to Book Value of 5.01, and an EV to EBITDA ratio of 216.76. These figures starkly contrast with peers such as K P R Mill Ltd, which has a PE ratio of 46.47, and Trident, valued fairly with a PE of 43.26, highlighting Axita Cotton's relative overvaluation.
Additionally, Axita Cotton's recent stock performance has been underwhelming, with a year-to-date return of -17.8%, significantly lagging behind the Sensex's 4.55% gain. The company's low ROCE of 0.59% and ROE of 0.62% further reinforce the notion that its current valuation does not align with its financial performance. Overall, the combination of high valuation ratios and poor stock performance suggests that Axita Cotton is not a favorable investment at this time.