Is REE Automotive Ltd. overvalued or undervalued?

As of 17 December 2024, the valuation grade for REE Automotive Ltd. has moved from risky to does not qualify, indicating a significant deterioration in its financial standing. The company is currently assessed as overvalued, particularly given its P/E ratio is not applicable due to losses, while the Price to Book Value stands at 1.05, and both the EV to EBIT and EV to EBITDA ratios are at 0.14, suggesting that the market is not valuing the company favorably compared to its earnings potential.
In comparison to its peers, REE Automotive Ltd. shows a stark contrast; for instance, Cooper-Standard Holdings, Inc. has a P/E ratio of -15.14 and is rated as risky, while China Yuchai International Ltd. is rated attractive with a P/E of 8.31. The notable outlier in REE's metrics is its ROCE at an astonishing 672.81%, although this figure is misleading due to the negative ROE of -384.83%. Furthermore, the company's stock has underperformed significantly against the S&P 500, with a year-to-date return of -93.61% compared to the index's 2.44%, reinforcing the view that REE Automotive Ltd. is currently overvalued.