Is Cerence, Inc. overvalued or undervalued?

As of 9 August 2022, Cerence, Inc. moved from fair to risky, indicating a shift towards a more cautious outlook. The company appears overvalued based on its current valuation metrics. The P/E ratio stands at 9, while the EV to EBITDA ratio is a high 28.81, and the PEG ratio is exceptionally low at 0.03, suggesting that the stock may not be justified at its current price given its earnings growth prospects.
In comparison to its peers, Cerence's P/E ratio of 409.37 is significantly higher than Definitive Healthcare Corp.'s 8.68, which indicates a stark valuation disparity. Additionally, the company's ROE of 31.77% is impressive, yet it is overshadowed by the high valuation ratios that raise concerns about sustainability. Over the past year, Cerence has outperformed the S&P 500 with a return of 364.54% compared to the index's 17.14%, but this strong performance may not be enough to justify its current valuation.