Is Nicholas Financial, Inc. overvalued or undervalued?

As of 29 July 2022, the valuation grade for Nicholas Financial, Inc. has moved from attractive to risky, indicating a significant deterioration in its financial outlook. The company appears to be overvalued given its current metrics, particularly with a Price to Book Value of 0.88 and an EV to EBIT ratio of 6.69, which are concerning in the context of its financial performance. The ROE stands at a troubling -53.88%, suggesting that the company is not generating returns for its shareholders.
In comparison to its peers, Nicholas Financial's performance is notably weaker; for instance, Ocwen Financial Corp. has a P/E ratio of 3.79 and an EV to EBITDA of 0.13, while Security National Financial Corp. shows a P/E of 10.10 and an EV to EBITDA of 58.68. These figures highlight the challenges Nicholas Financial faces in attracting investor confidence. Additionally, the company's stock has underperformed against the S&P 500 over various time frames, including a 1Y return of -17.75% compared to the index's 10.26%. Overall, the combination of poor financial ratios and relative underperformance leads to the conclusion that Nicholas Financial, Inc. is overvalued.