Is Petco Health & Wellness Company, Inc. overvalued or undervalued?

As of 29 November 2023, the valuation grade for Petco Health & Wellness Company, Inc. has moved from expensive to risky, indicating a deteriorating outlook. The company appears to be overvalued, particularly given its negative P/E ratio and low return metrics. Key ratios include a Price to Book Value of 0.69, an EV to EBITDA of 9.62, and an EV to Sales of 0.42, which suggest that the company is not generating sufficient returns relative to its valuation.
In comparison to peers, Petco's valuation metrics are significantly less favorable; for instance, Chewy, Inc. has a P/E ratio of 44.86 and an EV to EBITDA of 69.06, indicating a much higher market valuation despite its own challenges. Additionally, Global-e Online Ltd. shows a risky valuation with a P/E of -216.53, highlighting the volatility in this sector. Over the past year, Petco has underperformed the S&P 500, with a stock return of -24.52% compared to the index's 17.14%, reinforcing the notion that the stock is struggling relative to broader market trends.