Is Natco Pharma overvalued or undervalued?

As of 11 February 2025, Natco Pharma's valuation grade has moved from fair to very attractive, indicating a significant improvement in its perceived value. The company is currently considered undervalued, with a PE ratio of 8.16, an EV to EBITDA of 5.99, and a PEG ratio of 0.23, all of which suggest that it is trading at a discount compared to its earnings growth potential.
In comparison to its peers, Natco Pharma stands out with a much lower PE ratio than Sun Pharma, which is at 35.25, and Divi's Lab, which has a PE of 79.33. Additionally, while Natco's EV to EBITDA is 5.99, Sun Pharma's is significantly higher at 24.91, reinforcing the notion that Natco is undervalued relative to its industry counterparts. Despite recent underperformance against the Sensex, with a year-to-date return of -37.61% compared to the Sensex's 5.63%, the strong fundamental ratios suggest that Natco Pharma presents a compelling investment opportunity at its current price of 865.40.