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Overvaluation

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Overvaluation
In technical analysis, a situation in which a security has too high a price. This means that the technical indicators on the security do not justify its current price. Technical analysts may recommend selling overbought securities as they are due for a price correction. It can be difficult to determine whether or not a company is overvalued, but a high price-earnings ratio is one way. A price-earnings ratio over 1 indicates that the stock price is more than the company's earnings per share, which may mean that the company is overvalued. See also: Undervaluation.

Overvaluation. A stock whose price seems unjustifiably high based on standard measures, such as its earnings history, is considered overvalued.

One indication of overvaluation is a price-to-earnings ratio (P/E) significantly higher than average for the market as a whole or for the industry of which the corporation is a part. The consequence of overvaluation is usually a drop in the stock's price -- sometimes a rather dramatic one.



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Substantial currency overvaluation in Mozambique has the potential to significantly impede its economic development," said the report, a working paper which while published by the IMF does not necessarily reflect its views.
In the meantime, continued gains may be considered in the context of creating a more pronounced overvaluation, presenting an increasingly more attractive selling opportunity ahead.
John Hawks worth, head of macroeconomics at PwC, said: "Although the estimated average UK house price overvaluation of around 25 per cent in mid-2007 has now been largely eliminated, our analysis suggests that house prices could still have further to fall over the next year.
 
 
 
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