Is Hindustan Motors overvalued or undervalued?

As of 30 January 2025, the valuation grade for Hindustan Motors has moved from very expensive to risky, indicating a shift in market perception. The company is currently considered overvalued, with a PE ratio of 41.62, a price-to-book value of 39.69, and an EV to EBITDA ratio of -200.14. These ratios suggest that the company's stock price does not align well with its underlying financial performance.
In comparison to its peers, Hindustan Motors' valuation metrics are significantly higher than those of Maruti Suzuki, which has a PE ratio of 26.98, and Mahindra & Mahindra, with a PE ratio of 29.86. This disparity highlights the overvaluation of Hindustan Motors relative to its competitors in the automobile industry. Additionally, while the stock has shown strong performance over the past five years with a return of 313.91%, it has underperformed the Sensex over the last year, which may further reinforce concerns about its current valuation.