Overvalued

AAA

DEFINITION of 'Overvalued'

A stock with a current price that is not justified by its earnings outlook or price/earnings (P/E) ratio and, therefore, is expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the stock's market price, or from a deterioration in a company's financial strength.

INVESTOPEDIA EXPLAINS 'Overvalued'

Potential investors do not want to overpay for a stock. A few factors they may look at is the price to earnings (P/E) ratio in comparison to the company's peers, and the price to earnings growth (PEG) ratio to determine if a stock is overvalued. There are other factors as well that investors look at.

RELATED TERMS
  1. Watered Stock

    Stock that is issued with a value much greater than the value ...
  2. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
  3. Fully Valued

    A stock whose price analysts believe reflects the market's recognition ...
  4. Undervalued

    A financial security or other type of investment that is selling ...
  5. Oversold

    1. A condition in which the price of an underlying asset has ...
  6. Q Ratio (Tobin's Q Ratio)

    A ratio devised by James Tobin of Yale University, Nobel laureate ...
Related Articles
  1. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

    Using The Price-To-Book Ratio To Evaluate ...

  2. Peer Comparison Uncovers Undervalued ...
    Investing

    Peer Comparison Uncovers Undervalued ...

  3. The Greatest Market Crashes
    Budgeting

    The Greatest Market Crashes

  4. Achieving Better Returns In Your Portfolio
    Bonds & Fixed Income

    Achieving Better Returns In Your Portfolio

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center