Is Homology Medicines, Inc. overvalued or undervalued?

As of 9 February 2024, the valuation grade for Homology Medicines, Inc. has moved from risky to does not qualify, indicating a significant downgrade in its investment appeal. The company is currently assessed as overvalued, particularly given its negative price-to-book value of -5.77 and a high return on capital employed (ROCE) of 113.04%, which suggests inefficiencies in capital utilization despite high returns.
In comparison to its peers, Homology Medicines shows a stark contrast with G1 Therapeutics, Inc. and ADC Therapeutics SA, both rated as risky with P/E ratios of -8.43 and -2.10, respectively. The EV to EBITDA ratio for Homology is 0.46, which is more favorable than some peers, but the overall financial health and performance metrics suggest that the stock is not justified at its current price of $1.53, especially considering its drastic underperformance against the S&P 500 over the past year, where it has declined by 90.12%.