Is B. Riley Financial, Inc. overvalued or undervalued?

As of 8 November 2023, B. Riley Financial, Inc. has moved from a very attractive to a risky valuation grade. The company is currently assessed as overvalued, particularly given its negative price-to-book value of -0.18 and a low EV to EBITDA ratio of 0.85, which indicates that the market may not be pricing in the risks associated with its financial performance. Additionally, the company has a return on capital employed (ROCE) of 52.92%, which is impressive, yet the negative return on equity (ROE) suggests underlying issues that could deter investors.
In comparison to its peers, B. Riley's valuation is concerning, especially when looking at its EV to EBIT ratio of 0.78, which is not favorable when compared to other firms in the sector. For instance, while specific peer comps were not provided, the general industry trends indicate that companies with positive earnings and growth prospects typically have higher multiples. The stock has significantly underperformed relative to the S&P 500 over various time frames, including a staggering 85.46% decline over the past year, reinforcing the notion that the stock is currently overvalued amidst its financial struggles.