Is Karat Packaging, Inc. overvalued or undervalued?

As of 8 May 2025, the valuation grade for Karat Packaging, Inc. moved from fair to very attractive, indicating a significant positive shift in its perceived value. The company is currently assessed as undervalued. Key ratios include a P/E ratio of 20, an EV to EBITDA of 10.98, and a ROCE of 24.48%, which reflect strong operational efficiency and profitability compared to its peers.
In comparison, a notable peer, with a valuation of very attractive, has a P/E ratio of 17.0688 and an EV to EBITDA of 9.4298, suggesting that Karat Packaging is priced higher relative to its earnings potential. Despite this, the company's strong financial metrics, particularly its ROE of 20.57%, support the undervaluation narrative. Over the past year, Karat Packaging has underperformed against the S&P 500, which could further indicate a buying opportunity given its attractive valuation metrics.