Is BHEL overvalued or undervalued?

As of 19 May 2025, the valuation grade for BHEL has moved from expensive to very expensive, indicating a significant shift in its market perception. The company appears to be overvalued based on its high PE ratio of 166.73, an EV to EBITDA of 72.83, and a Price to Book Value of 3.60. These ratios suggest that BHEL is trading at a premium compared to its earnings and book value, raising concerns about its valuation.
In comparison to its peers, BHEL's PE ratio is substantially higher than that of A B B, which stands at 67.88, and Apar Industries, which is at 39.79. This stark contrast highlights the overvaluation of BHEL relative to its industry counterparts. Additionally, while BHEL has shown a remarkable return of 409.48% over the past three years, its recent performance has lagged behind the Sensex, with a 1-year return of -9.57% compared to the Sensex's 7.64%. Overall, the evidence strongly suggests that BHEL is overvalued in the current market context.