Is Bandwidth, Inc. overvalued or undervalued?

As of 28 February 2024, the valuation grade for Bandwidth, Inc. has moved from fair to risky, indicating a deterioration in its investment appeal. The company appears to be overvalued given its financial metrics, particularly with a Price to Book Value of 1.29 and an EV to EBITDA ratio of 17.68, which suggests that investors are paying a premium relative to its earnings potential. Additionally, the negative ROCE of -2.55% and ROE of -3.58% further highlight the company's struggles in generating returns.
In comparison to its peers, Bandwidth, Inc. has a significantly worse EV to EBITDA ratio than Domo, Inc. at -31.38 and 8x8, Inc. at 10.24, both of which are also classified as risky. This places Bandwidth at a disadvantage within its industry, reinforcing the notion that it is overvalued. Although specific return data is not available, the lack of positive returns relative to the S&P 500 further supports the view that the stock is not performing well in the current market environment.