Is Reliance Power overvalued or undervalued?

As of 28 July 2025, Reliance Power's valuation grade has moved from expensive to fair. The company is currently fairly valued despite its unusual PE ratio of -4313.36, which indicates significant challenges in profitability. Other key ratios include a Price to Book Value of 1.36 and an EV to EBITDA of 18.03, suggesting that while the company may not be generating profits, its asset valuation is reasonable in comparison to its earnings potential.
In comparison to peers, NTPC stands out with a PE ratio of 13.78 and an EV to EBITDA of 10.38, indicating a more attractive valuation, while Tata Power Co. has a PE of 31.56 and an EV to EBITDA of 12.91, reflecting a premium valuation in the sector. Notably, Reliance Power's recent stock performance has outpaced the Sensex over the past year, with a return of 80.90% compared to the Sensex's -0.54%, which may reinforce the perception of its fair valuation amidst broader market challenges.