Is Hydrofarm Holdings Group, Inc. overvalued or undervalued?

As of 10 May 2022, the valuation grade for Hydrofarm Holdings Group, Inc. has moved from fair to risky, indicating a significant downgrade in its financial outlook. The company appears to be overvalued based on its current metrics, particularly given its negative P/E ratio and troubling returns on equity and capital employed, which stand at -31.33% and -12.56%, respectively. The price-to-book value is notably low at 0.08, suggesting that the market is pricing the company at a substantial discount relative to its net assets.
In comparison to its peers, Hydrofarm's valuation metrics are concerning. For instance, Douglas Dynamics, Inc. has a fair valuation with a P/E of 10.57 and an EV/EBITDA of 11.73, while Columbus McKinnon Corp. is also rated risky with a P/E of -84.83 and an EV/EBITDA of 8.19. The stark contrast in these ratios highlights the challenges Hydrofarm faces in the current market environment. Additionally, the company's performance has lagged significantly behind the S&P 500, with a year-to-date return of -32.93% compared to the index's 2.44%. Overall, the combination of poor financial ratios and unfavorable peer comparisons suggests that Hydrofarm Holdings Group, Inc. is overvalued at this time.