Is Capricorn System overvalued or undervalued?

As of 12 November 2024, Capricorn System's valuation grade has moved from does not qualify to risky, indicating significant concerns regarding its financial health. The company appears to be overvalued given its negative PE ratio of -6.81 and EV to EBIT of -6.59, which suggest that it is not generating positive earnings. Additionally, the ROE stands at a troubling -24.18%, reflecting poor returns on equity.
In comparison to its peers, Capricorn System's valuation metrics are starkly unfavorable. For instance, TCS and Infosys, which are in the same industry, have attractive PE ratios of 25.23 and 24.32, respectively, highlighting the disparity in performance. The company's current price of 17.89, while reflecting a recent increase, does not align with its negative earnings and returns, reinforcing the conclusion that it is overvalued. Over the past year, Capricorn System has outperformed the Sensex with a return of 35.74% compared to 7.61%, but this does not mitigate the underlying financial issues that suggest a cautionary stance on its valuation.