Is Scholar Rock Holding Corp. overvalued or undervalued?

As of 9 May 2023, Scholar Rock Holding Corp. has moved from a valuation grade of risky to does not qualify, indicating a significant deterioration in its financial standing. The company is currently considered overvalued given its troubling financial ratios, including a Price to Book Value of 10.41 and an EV to EBIT of -10.86, which suggest that the market is pricing in expectations that are not supported by its current earnings or asset performance. Furthermore, the Return on Capital Employed (ROCE) is alarmingly low at -8470.74%, reflecting severe inefficiencies in capital utilization.
In comparison to its peers, Scholar Rock's valuation metrics are less favorable; for instance, Avidity Biosciences has a P/E ratio of -9.5851 and an EV to EBITDA of -5.0262, while Janux Therapeutics shows a P/E of -17.5680 and an EV to EBITDA of -3.1688. These comparisons highlight that Scholar Rock's financial health is significantly worse than its competitors in the sector. Despite a strong one-year stock return of 293.85% compared to the S&P 500's 10.26%, the underlying financial metrics suggest that the stock is not justified at its current price of 33.28, reinforcing the conclusion that it is overvalued.