Is olimar underrated?

It helps if you state the game you are talking about.

Im assuming you meant Captain Olimar from SSBB?

Much of it depends on how comfortable you feel with the character, none of them are bad, just some of them have a better moveset and play more smoothly than others. Olimar's main problem is that he cannot even do a smash attack unless he has Pikmin with him. But that doesn't necessarily make him useless, it all depends on how you play as him. So he may be underrated by some, yes, but that does not make him a bad character.

I can obliterate anybody I fight against with Princess Peach, and she too is a bad character (or so people say).

Although according to this, Olimar is ranked in one of the higher tiers - http://super-smash-bros.wikia.com/wiki/Tier_list

Is this a SSBB question? Cause it sounds like it... Personally I think Sheik is the best. I haven't been very good with Olimar, but I do find him to be annoying (Meaning yes, he has killed me before when a human player is using him)

Well in a sence "no". He is in one of the bottom "tiers" on SSBB.