Is ITC overvalued or undervalued?

As of 6 January 2025, the valuation grade for ITC has moved from very expensive to expensive, indicating a slight shift in perception but still suggesting that the stock may be overvalued. The company is currently assessed as overvalued based on its key financial ratios, including a PE Ratio of 22.42, an EV to EBITDA of 19.35, and a PEG Ratio of 1.39.
When compared to peers, ITC's valuation appears less favorable; for instance, Godfrey Phillips has a significantly higher PE Ratio of 37.53, while VST Industries, which is rated as fair, has a PE of 22.98. Additionally, ITC's dividend yield of 1.54% is lower than the industry average, which could further influence investor sentiment. Notably, ITC has underperformed the Sensex on a year-to-date basis with a return of -7.43% compared to the Sensex's 5.61%, reinforcing the view that the stock may not be a compelling investment at its current price of 423.50.