Is Kingsway Financial Services, Inc. overvalued or undervalued?

As of 8 May 2024, the valuation grade for Kingsway Financial Services, Inc. has moved from expensive to risky, indicating a shift in perception regarding its financial health. The company appears to be overvalued, especially given its negative P/E ratio and poor returns on capital, with a Price to Book Value of 18.80 and an EV to EBITDA of 70.68. Additionally, the ROCE stands at -40.25%, further highlighting its financial struggles.
In comparison to its peers, Donegal Group, Inc. has a fair valuation with a P/E of 9.04, while James River Group Holdings Ltd. is also rated risky with a P/E of -2.90. This stark contrast emphasizes Kingsway's unfavorable position within the industry. Despite its overvaluation, Kingsway has outperformed the S&P 500 significantly over multiple periods, with a YTD return of 73.60% compared to the S&P 500's 12.22%, suggesting that market sentiment may be temporarily inflating its stock price.