Is PennantPark Floating Rate Capital Ltd. overvalued or undervalued?

As of 15 November 2023, the valuation grade for PennantPark Floating Rate Capital Ltd. has moved from risky to very attractive, indicating a significant improvement in its investment appeal. The company appears undervalued based on its current metrics, with a P/E ratio of 15, a price-to-book value of 0.96, and an EV to EBITDA ratio of 5.80. These figures suggest that the stock is trading at a discount relative to its earnings and asset value.
In comparison to its peers, PennantPark's P/E ratio is higher than New Mountain Finance Corp. at 10.10, but lower than Capital Southwest Corp. at 17.11. Additionally, its EV to EBITDA ratio is slightly above New Mountain Finance Corp.'s 4.10, indicating that while it is more expensive than some peers, it still offers a compelling valuation relative to others in the sector. The company's dividend yield of 4.69% also adds to its attractiveness, especially in a low-yield environment. Despite recent underperformance against the S&P 500, the overall valuation suggests that PennantPark Floating Rate Capital Ltd. is positioned for potential upside.