Is Resources Connection, Inc. overvalued or undervalued?

As of 2 January 2025, the valuation grade for Resources Connection, Inc. has moved from very attractive to risky, indicating a significant shift in its perceived value. The company appears to be overvalued, especially when considering its P/E ratio of 7, which is substantially lower than peers like The Hackett Group, Inc. with a P/E of 69.15 and Cass Information Systems, Inc. at 29.81. Additionally, Resources Connection's EV to EBITDA stands at 5.38, while its peers generally exhibit higher multiples, further suggesting a relative overvaluation.
The company's Price to Book Value of 0.61 and an EV to Capital Employed of 0.49 reinforce the notion that it may not be positioned favorably compared to its competitors. Notably, while Resources Connection has shown positive short-term returns, such as a 7.47% increase over the past week compared to a 1.05% rise in the S&P 500, its longer-term performance has been disappointing, with a YTD return of -35.87% versus the S&P 500's 12.22%. This stark contrast in performance highlights the risks associated with investing in Resources Connection at its current valuation.