Is Terns Pharmaceuticals, Inc. overvalued or undervalued?

As of 27 March 2023, the valuation grade for Terns Pharmaceuticals, Inc. has moved from risky to does not qualify, indicating a significant downgrade in its investment appeal. The company appears to be overvalued given its current metrics, with a Price to Book Value of 0.99 and an EV to EBIT of 0.10, suggesting that the market may not be accurately reflecting the company's underlying value. Additionally, the Return on Capital Employed (ROCE) is exceptionally high at 1332.80%, but the Return on Equity (ROE) is negative at -27.72%, indicating potential issues with profitability.
In comparison to its peers, Terns Pharmaceuticals has a P/E ratio of -3.7684, while Scholar Rock Holding Corp. and Edgewise Therapeutics, Inc. have P/E ratios of -11.1959 and -10.4346, respectively, both indicating a challenging environment for valuation. The recent stock performance shows a decline of 49.1% over the past year compared to a 10.26% increase in the S&P 500, reinforcing the notion that Terns Pharmaceuticals is struggling relative to broader market trends. Overall, the combination of negative ratios and poor stock performance suggests that the company is overvalued at its current price of $3.68.