Is Morgan Stanley Direct Lending Fund overvalued or undervalued?

As of 7 November 2024, the valuation grade for Morgan Stanley Direct Lending Fund moved from fair to very attractive, indicating a significant improvement in its investment appeal. The company appears undervalued, supported by a P/E ratio of 9, a Price to Book Value of 0.93, and an EV to EBITDA ratio of 5.03. In comparison, its peer, which has a P/E of approximately 9.16 and an EV to EBITDA of 4.85, suggests that Morgan Stanley Direct Lending Fund is priced competitively within its industry.
Despite the attractive valuation metrics, the company's recent stock performance has lagged behind the S&P 500, with a year-to-date return of -14.62% compared to the index's 12.22%. This discrepancy highlights a potential opportunity for investors, as the current valuation does not seem to reflect the company's underlying financial strength, evidenced by a ROCE of 18.50% and a ROE of 10.65%.