Is Sono-Tek Corp. overvalued or undervalued?

As of 13 January 2025, the valuation grade for Sono-Tek Corp. has moved from expensive to very expensive, indicating a significant shift in its market perception. The company is currently overvalued, with a P/E ratio of 46, which is substantially higher than its peer Graham Corp. at 45.56 and Natural Gas Services Group at 18.93. Additionally, Sono-Tek's EV to EBITDA stands at 26.77, compared to Graham Corp.'s 24.81, further emphasizing its inflated valuation relative to peers.
In terms of financial performance, Sono-Tek's ROCE is 17.23% and ROE is 7.00%, which, while respectable, do not justify its high valuation metrics. The company's stock has underperformed relative to the S&P 500 over the past year, with a return of -11.76% compared to the index's 10.26%. This combination of high valuation ratios and poor stock performance reinforces the conclusion that Sono-Tek Corp. is currently overvalued in the market.