Is Trex Co., Inc. overvalued or undervalued?

As of 28 October 2024, Trex Co., Inc. has moved from an expensive to a very expensive valuation grade. The company appears to be overvalued based on its current financial metrics. Notably, Trex has a P/E ratio of 38, which is significantly higher than its peer average of approximately 35.85, and an EV to EBITDA ratio of 24.64, compared to peers like The AZEK Co., Inc. at 21.07 and Beacon Roofing Supply, Inc. at 12.17. Additionally, Trex's Price to Book Value stands at 8.25, indicating a premium over its book value.
In terms of profitability, Trex boasts a ROCE of 19.73% and an ROE of 21.73%, which are commendable figures; however, the high valuation ratios suggest that the market has priced in excessive growth expectations. The stock has underperformed relative to the S&P 500, with a year-to-date return of -19.98% compared to the index's 2.44%, reinforcing the notion that Trex may not justify its current valuation levels.