Is Reliance Power overvalued or undervalued?

As of 30 May 2025, Reliance Power's valuation grade has moved from fair to expensive, indicating a shift towards overvaluation. The company's current PE ratio stands at -171.52, with an EV to EBITDA ratio of 18.78 and a Price to Book Value of 1.56. These ratios suggest that the stock is not only underperforming in terms of profitability but also carries a high valuation relative to its earnings potential.
In comparison to peers, NTPC is rated very attractive with a PE of 13.78 and an EV to EBITDA of 10.37, while Adani Power is categorized as expensive with a PE of 16.55. This stark contrast highlights Reliance Power's overvaluation in the current market. Additionally, despite a strong recent performance with a 1-year return of 151.92% compared to the Sensex's 7.58%, the underlying financial metrics indicate that Reliance Power is overvalued at its current price of 62.98.