Is Velan Hotels overvalued or undervalued?

As of 25 April 2023, the valuation grade for Velan Hotels has moved from does not qualify to risky, indicating a significant downgrade in its investment appeal. The company appears to be overvalued based on its financial ratios, with a price-to-earnings (PE) ratio of -7.11, an EV to EBITDA ratio of -69.00, and a return on equity (ROE) of -49.36%. These figures suggest that the company is struggling financially and may not be a sound investment at its current price of 6.27.
In comparison to its peers, Velan Hotels' financial metrics starkly contrast with those of Indian Hotels Co, which has a PE ratio of 66.81, and ITC Hotels, with a PE ratio of 65.26, both classified as very expensive. The negative ratios of Velan Hotels highlight its poor performance relative to the industry, reinforcing the conclusion that it is overvalued. Additionally, the stock has underperformed against the Sensex over various time frames, particularly with a year-to-date return of -18.25% compared to the Sensex's 5.59%, further supporting the assessment of its overvaluation.