Is Patanjali Foods overvalued or undervalued?

As of 23 July 2025, the valuation grade for Patanjali Foods has moved from expensive to very expensive, indicating a significant shift in its perceived market value. The company is currently overvalued, with a PE ratio of 53.92, an EV to EBITDA ratio of 36.56, and a Price to Book Value of 6.17. These ratios suggest that the stock is trading at a premium compared to its earnings and book value.
In comparison with peers, Hindustan Unilever has a PE ratio of 55.29 and an EV to EBITDA of 38.13, while Nestle India shows a much higher PE of 76.39 and an EV to EBITDA of 50.34. This places Patanjali Foods in a competitive yet concerning position within the edible oil industry, as it is not only very expensive relative to its peers but also exhibits lower returns on capital with a ROCE of 14.14% and ROE of 11.44%. Notably, the company's stock has outperformed the Sensex over various periods, including a 20.08% return over the last year compared to the Sensex's 2.86%, which may contribute to the inflated valuation perception.