Is Kwality Pharma overvalued or undervalued?

As of 1 July 2025, the valuation grade for Kwality Pharma has moved from fair to expensive. The company is currently considered overvalued based on its key financial ratios, including a PE ratio of 30.15, an EV to EBITDA of 16.16, and a PEG ratio of 0.79. These figures indicate that the stock is trading at a premium compared to its earnings growth potential.
In comparison to its peers, Kwality Pharma's PE ratio is lower than Sun Pharma's 34.98 but significantly higher than Cipla's attractive valuation at 23.21. Additionally, while Kwality Pharma's ROCE stands at 17.17% and ROE at 15.09%, these returns do not justify the high valuation relative to peers like Dr. Reddy's Labs, which has a more attractive valuation with a PE of 18.85. The company's recent stock performance has outpaced the Sensex, with a 1-year return of 130.3% compared to the Sensex's 5.31%, but this strong performance does not mitigate the overvaluation concerns.