Is Tata Elxsi overvalued or undervalued?

As of 15 April 2025, Tata Elxsi's valuation grade has moved from expensive to very expensive, indicating a significant shift in its perceived market value. The company is currently considered overvalued, with a PE ratio of 51.28, an EV to EBITDA ratio of 39.72, and a Price to Book Value of 14.07. These ratios suggest that the stock is trading at a premium compared to its earnings, cash flows, and book value.
In comparison to its peers, Tata Elxsi's valuation metrics stand out starkly; for instance, TCS has a PE ratio of 25.23 and EV to EBITDA of 17.63, while Infosys shows a PE ratio of 24.32 and EV to EBITDA of 15.83. This highlights that Tata Elxsi is trading at a much higher valuation compared to these industry benchmarks. Despite a strong ROCE of 75.21% and a robust ROE of 27.45%, the overall valuation suggests that investors may be paying too much for potential growth, especially considering its recent stock performance, which has lagged behind the Sensex over the past year.