Is Spectrum Foods overvalued or undervalued?

As of 31 January 2025, Spectrum Foods has moved from an expensive to a risky valuation grade. The company is currently considered overvalued based on its high PE ratio of 58.86, an EV to EBITDA ratio of 59.34, and a low ROCE of 0.11%. In comparison, its peers such as Hindustan Unilever and Nestle India, which are classified as very expensive, have PE ratios of 53.88 and 75.2, respectively, indicating that Spectrum Foods is trading at a premium despite its lower performance metrics.
The company’s valuation appears unsustainable given its significant price-to-book ratio of 1.32 and a negative EV to EBIT ratio of -59.34, which further emphasizes the risk associated with its current pricing. Additionally, the stock has underperformed against the Sensex over various time frames, particularly in the last year where it reported a -9.18% return compared to the Sensex's 7.60%. Overall, the combination of high valuation ratios and poor returns suggests that Spectrum Foods is overvalued in the current market environment.