Is Outbrain, Inc. overvalued or undervalued?

As of 27 February 2025, the valuation grade for Outbrain, Inc. has moved from expensive to risky, indicating a significant shift in its financial outlook. The company is currently considered overvalued, particularly given its negative P/E ratio and poor returns on equity and capital employed, with figures of -1.74% and -0.01%, respectively. Additionally, the price to book value stands at 0.56, suggesting that the market is pricing the stock below its book value, yet the overall financial health remains concerning.
In comparison to peers, Outbrain's valuation metrics are notably unfavorable; for instance, Red Violet, Inc. has a P/E ratio of 77.67, while Bandwidth, Inc. shows a P/E of -33.99. Outbrain's EV to EBITDA ratio is 27.24, which is considerably high compared to its peers, indicating that investors are paying a premium for its earnings before interest, taxes, depreciation, and amortization. Furthermore, the company's stock has significantly underperformed against the S&P 500, with a year-to-date return of -66.99% compared to the index's 2.44%. This combination of factors reinforces the conclusion that Outbrain, Inc. is currently overvalued.