Is Mercury Systems, Inc. overvalued or undervalued?

As of 31 January 2023, the valuation grade for Mercury Systems, Inc. moved from expensive to risky, indicating a shift in perception regarding its financial health. The company appears to be overvalued given its current metrics, particularly with a Price to Book Value of 2.19 and an EV to EBITDA ratio of 73.95, which suggests that investors are paying a premium relative to its earnings potential. Additionally, the negative ROCE of -2.04% and ROE of -2.77% further highlight the challenges the company faces in generating returns.
In comparison to its peers, Mercury Systems, Inc. has a significantly higher EV to EBITDA ratio than Leonardo DRS, Inc. at 26.25 and Huntington Ingalls Industries, Inc. at 21.02, both of which are considered to be in better valuation positions. Despite its recent stock performance, with a year-to-date return of 83.56% compared to the S&P 500's 12.22%, the overall financial metrics suggest that the stock may not be justified at its current price level.