Is Methode Electronics, Inc. overvalued or undervalued?

As of 7 December 2023, the valuation grade for Methode Electronics, Inc. has moved from expensive to risky, indicating a shift in perception regarding its financial health. The company appears to be overvalued based on its current metrics, particularly given its negative return on equity (ROE) of -4.90% and return on capital employed (ROCE) of -0.82%. The price-to-book value stands at a low 0.43, suggesting that the stock is trading significantly below its book value, which could imply undervaluation in certain contexts, but the overall financial performance points to risks.
In comparison to peers, Methode's EV to EBITDA ratio is 10.83, while RxSight, Inc. has a much lower EV to EBITDA of -3.5473, highlighting a stark contrast in operational efficiency. The company's dividend yield of 6.63% may attract income-focused investors, but the underlying losses and negative profitability ratios raise concerns. Despite the lack of recent return data, the absence of positive returns compared to the S&P 500 suggests that the stock may not be performing well relative to broader market trends, reinforcing the view that Methode Electronics is currently overvalued.