Is Nestle India overvalued or undervalued?

As of 2 February 2024, Nestle India's valuation grade has moved from very attractive to very expensive, indicating a significant shift in its market perception. The company is currently considered overvalued, with a PE ratio of 75.20, a Price to Book Value of 56.55, and an EV to EBITDA of 49.57. These ratios are notably higher than its peers, such as Hindustan Unilever with a PE of 53.88 and Britannia Industries at 61.44, suggesting that Nestle India is trading at a premium compared to its competitors in the FMCG sector.
Despite a robust ROE of 75.19% and a high ROCE of 53.34%, the elevated valuation ratios raise concerns about sustainability and future growth prospects. The company's recent stock performance has lagged behind the Sensex over the past year, with a return of -3.78% compared to the Sensex's 7.57%, further reinforcing the notion that Nestle India may be overvalued in the current market environment.