Is Prime Focus overvalued or undervalued?

As of 2 July 2025, the valuation grade for Prime Focus has moved from attractive to fair. The company appears to be overvalued based on its current metrics. Key ratios include a PE ratio of 1650.64, an EV to EBITDA of 12.18, and a ROCE of 5.33%. Compared to peers, PVR Inox, which is rated attractive, has a PE ratio of NA (loss-making) and an EV to EBITDA of 10.81, while City Pulse Multi is considered very expensive with a PE of 1369.02 and an EV to EBITDA of 986.96.
Despite Prime Focus showing strong stock performance with a 1-year return of 22.98% compared to Sensex's 5.00%, the high valuation ratios suggest that it is currently overvalued. The company's significant PE ratio and low ROE of 0.40% indicate that investors may be paying too much relative to its earnings potential.