Is Talen Energy Corp. overvalued or undervalued?

As of 3 June 2025, Talen Energy Corp. has moved from a fair to an expensive valuation grade. The company is currently considered overvalued based on its financial ratios. The P/E ratio stands at 20, while the industry average P/E is significantly higher at approximately 22.66, indicating a premium valuation. Additionally, Talen's EV to EBITDA ratio is 8.76, which is lower than the peer average of 9.52, suggesting that while the company may have strong earnings, it is not necessarily priced attractively compared to its peers.
In terms of returns, Talen Energy has outperformed the S&P 500 significantly over the past year, with a return of 144.81% compared to the S&P's 10.26%. However, with a ROE of 49.15% and a ROCE of 32.45%, the company demonstrates strong profitability metrics, yet these do not justify its current high valuation levels. Overall, given the elevated ratios and comparison to peers, Talen Energy Corp. appears to be overvalued in the current market.