Is Chegg, Inc. overvalued or undervalued?

As of 5 August 2024, the valuation grade for Chegg, Inc. has moved from expensive to risky, indicating a significant deterioration in its financial standing. The company appears to be overvalued given its current metrics, particularly with a Price to Book Value of 0.94 and an EV to EBITDA ratio of 3.27, which suggests that the market may not be accurately reflecting the company's underlying financial health. Additionally, Chegg's ROCE stands at -27.24% and ROE at -68.18%, further highlighting the challenges it faces in generating returns.
In comparison to its peers, Chegg's EV to EBITDA ratio of 3.27 is notably lower than Thoughtworks Holding, Inc., which has an EV to EBITDA of 143.7472, indicating that Chegg is trading at a significant discount relative to its risk profile. Furthermore, the company's stock has underperformed against the S&P 500 over various time frames, with a 1-year return of -4.00% compared to the S&P 500's 17.14%, and a staggering 5-year return of -97.38% against the index's 96.61%. This trend reinforces the notion that Chegg is currently overvalued in the market.