Is FS KKR Capital Corp. overvalued or undervalued?

As of 10 May 2021, the valuation grade for FS KKR Capital Corp. has moved from risky to very attractive, indicating a significant improvement in its investment appeal. The company appears undervalued, particularly when considering its P/E ratio of 11, which is notably lower than peers like Franklin Resources, Inc. with a P/E of 14.94 and Stifel Financial Corp. at 18.08. Additionally, FS KKR's price-to-book value stands at 0.91 and its EV to EBITDA ratio is 5.49, further suggesting that the stock is trading at a discount relative to its peers.
Despite the attractive valuation metrics, FS KKR has underperformed compared to the S&P 500, with a year-to-date return of -26.93% versus the index's 12.22%. This trend continues over longer periods, with a 1-year return of -19.20% compared to the S&P 500's 17.14%. Overall, the combination of strong dividend yield at 13.43% and solid ROCE of 16.46% reinforces the notion that FS KKR Capital Corp. is currently undervalued in the market.