Is Silicon Laboratories, Inc. overvalued or undervalued?

As of 7 February 2024, Silicon Laboratories, Inc. has moved from a fair to risky valuation grade, indicating a shift towards being overvalued. The company appears overvalued given its negative P/E ratio and poor returns on capital, with a Price to Book Value of 3.86 and an EV to Sales ratio of 5.64, which are significantly higher than peers like Fabrinet, which has a P/E of 41.84, and Qorvo, Inc., with a P/E of 36.95. Additionally, the company’s ROCE and ROE are both negative at -21.51% and -15.44%, respectively, further supporting the overvaluation thesis.
In terms of recent performance, Silicon Laboratories has outperformed the S&P 500 over the past week, month, and year, with returns of 4.26%, 6.80%, and 27.53%, respectively, compared to the S&P 500's 1.05%, 2.33%, and 17.14%. However, over longer periods such as 3 years and 5 years, the company significantly lags behind the S&P 500, with returns of 9.13% and 46.92% compared to 70.41% and 96.61% for the index. This mixed performance, coupled with the high valuation ratios, suggests that Silicon Laboratories is currently overvalued.