Is Sheela Foam overvalued or undervalued?

As of 6 November 2025, the valuation grade for Sheela Foam has moved from attractive to very attractive. Despite this positive change, the company appears to be overvalued based on its current financial ratios. The PE ratio stands at an exceptionally high 119.16, while the EV to EBITDA ratio is also elevated at 44.27, indicating that investors are paying a premium for earnings before interest, taxes, depreciation, and amortization. Additionally, the Price to Book Value ratio is notably low at 0.24, which could suggest undervaluation in terms of asset value, but the overall high multiples raise concerns about sustainability.
When compared to peers, Sheela Foam's PE ratio significantly exceeds that of Metro Brands at 86.81 and V-Guard Industries at 55.25, both of which are considered more attractive investments in the current market environment. The high valuation multiples, coupled with a return on capital employed (ROCE) of just 0.26% and a return on equity (ROE) of 0.20%, further reinforce the notion that Sheela Foam is overvalued. Recent stock performance also reflects this sentiment, with a year-to-date decline of 32.23% compared to a 6.62% gain in the Sensex, suggesting that the market is not favoring Sheela Foam at these valuation levels.