Is Kodiak Gas Services, Inc. overvalued or undervalued?

As of 5 March 2025, the valuation grade for Kodiak Gas Services, Inc. has moved from very attractive to very expensive, indicating a significant shift in its perceived value. The company is currently overvalued, with a P/E ratio of 41, which is substantially higher than its peer Archrock, Inc. at 20.63 and Cactus, Inc. at 15.31. Additionally, Kodiak's EV to EBITDA stands at 9.17, while Archrock's is 11.00, suggesting that Kodiak's valuation metrics are not justified compared to its peers.
Further analysis reveals a PEG ratio of 0.34, which typically indicates growth potential, but when coupled with a high P/E ratio, it raises concerns about sustainability. The company's ROCE is at 8.97% and ROE at 5.88%, which are relatively low compared to industry standards. Despite a recent positive stock return of 30.5% over the past year, this does not align with its current overvaluation, especially when considering the S&P 500's return of 10.26% in the same period.