Is Rajesh Exports overvalued or undervalued?

As of 16 August 2024, Rajesh Exports' valuation grade has moved from very expensive to risky, indicating a shift in perception regarding its market worth. The company is currently assessed as overvalued, primarily due to its high price-to-earnings (PE) ratio of 96.21 and an EV to EBITDA ratio of 251.59, which are significantly elevated compared to its peers. In contrast, Titan Company, a direct competitor, has a PE ratio of 94.61 and an EV to EBITDA of 57.21, suggesting that Rajesh Exports is trading at a premium despite its financial challenges.
The company's financial ratios reveal concerning trends, with a return on capital employed (ROCE) of -0.28% and a return on equity (ROE) of just 0.25%. These figures highlight the inefficiencies in generating returns relative to its capital and equity. Additionally, Rajesh Exports has underperformed the Sensex over various time frames, notably with a year-to-date decline of 12.03% compared to the Sensex's gain of 5.61%. This underperformance, coupled with its high valuation ratios, reinforces the conclusion that Rajesh Exports is currently overvalued in the market.