Is NexPoint Diversified Real Estate Trust overvalued or undervalued?

As of 14 March 2024, the valuation grade for NexPoint Diversified Real Estate Trust has moved from does not qualify to risky, indicating a significant downgrade in its perceived investment quality. The company appears to be overvalued given its current metrics, particularly with a Price to Book Value of 0.23 and an EV to EBITDA of -10.57, which suggest that the market is pricing the stock higher than its fundamental value. Additionally, the negative ROCE of -3.86% and ROE of -6.16% further highlight the company's struggles in generating returns.
In comparison to its peers, NexPoint's valuation ratios are concerning; for instance, Whitestone REIT has a P/E of 39.17, while Invesco Mortgage Capital boasts an EV to EBITDA of 1.20, both significantly better than NexPoint's metrics. The stock's performance has also lagged behind the S&P 500, with a year-to-date return of -31.48% compared to the index's 12.22%, and a 3-year return of -72.08% versus 70.41% for the S&P 500. This stark contrast reinforces the notion that NexPoint Diversified Real Estate Trust is currently overvalued.