Is Etsy, Inc. overvalued or undervalued?

As of 2 November 2022, the valuation grade for Etsy, Inc. moved from expensive to risky, indicating a shift in perception regarding its market position. The company appears to be overvalued given its current P/E ratio of 21, which is higher than the industry average of 20.43, alongside a negative Price to Book Value of -7.31. Additionally, its EV to EBITDA ratio of 15.34 is also concerning when compared to peers like Global Industrial Co., which has a fair EV to EBITDA of 15.52.
In terms of performance, Etsy's stock has shown mixed results, with a year-to-date return of 22.61% compared to the S&P 500's 12.22%, suggesting it has outperformed the benchmark in the short term. However, over longer periods, such as the 3-year and 5-year returns, Etsy has significantly underperformed, with declines of -39.97% and -41.97%, respectively. This long-term underperformance, coupled with its high valuation ratios, reinforces the conclusion that Etsy, Inc. is currently overvalued.