Is Rane (Madras) overvalued or undervalued?

As of 11 July 2025, Rane (Madras) has moved from a fair to an attractive valuation grade. The company appears to be overvalued based on its high PE ratio of 167.41, which significantly exceeds the industry average, as well as its EV to EBITDA ratio of 14.37. In comparison, peers such as Samvardh. Mothe. have a PE ratio of 27.9 and an EV to EBITDA of 11.09, indicating that Rane (Madras) is trading at a premium relative to its competitors.
Despite its attractive grade, the company's financial metrics suggest caution. With a ROCE of 7.61% and a ROE of only 2.14%, the returns generated are relatively low compared to the elevated valuations. Additionally, while the stock has shown impressive long-term returns, its recent performance has lagged behind the Sensex, particularly over the past year, where it returned -3.97% compared to the Sensex's 3.26%. Overall, Rane (Madras) may be considered overvalued given its high valuation ratios and the underwhelming returns on equity and capital employed.