Is Mesa Royalty Trust overvalued or undervalued?

As of 14 November 2024, the valuation grade for Mesa Royalty Trust has moved from fair to does not qualify, indicating a significant downgrade in its investment appeal. The company appears to be overvalued based on its current metrics, with a P/E ratio of 10, which is below the industry average of approximately 12.16. Additionally, the EV to EBITDA ratio stands at 9.50, suggesting that the market may not be pricing in the company's earnings potential adequately.
In comparison to its peers, Mesa Royalty Trust's valuation metrics are less favorable; for instance, Silver Spike Investment Corp. has a P/E ratio of 13.64 and an EV to EBITDA of 12.63, both indicating a stronger market position. Other peers like Permianville Royalty Trust show a P/E of 22.46, further highlighting Mesa's relative overvaluation. Notably, while the stock has outperformed the S&P 500 in the short term, its one-year return of -27.85% starkly contrasts with the S&P's 10.26% gain, reinforcing the view that Mesa Royalty Trust is currently overvalued.