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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.


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.

References in periodicals archive ?
In part, the massive overvaluation of equity that occurred in the late 1990s and early 2000s is consistent with what we have seen in the past.
In sum, our results suggest that insofar as the need to avoid overvaluation is important and the domestic financial sector is underdeveloped, greater caution toward certain forms of foreign capital inflows might be warranted.
As discussed in Section 2, the external exogenous factors included in our empirical analysis are (trade-weighted) lagged external growth rates of the G-3, a measure of "openness" to foreign trade, and the lagged rate of real exchange rate overvaluation.
In addition, and more importantly, the overvaluation is making it tougher for U.
However, it was noted that some people don't wish to trigger an IRS audit by possible overvaluation of their deductions.
The absence of an official monetary policy has led to complaints regarding lack of transparency, and the peg itself has resulted in overvaluation of the Egyptian pound, larger trade deficits and a shortage of hard currency All of these factors contributed to slower GDP growth.
Since potential productivity has accelerated since the mid-1990s, it offers a potential partial explanation of the overvaluation that has developed in the traditional model.
In a framework that explicitly accounts for the role of productivity, substantial overvaluation of the peso is detected, but an undervaluation of the won is also uncovered.
There is such an overvaluation of technology stocks that it is absurd," Ballmer quipped.
65) from 2001 in order to pave the way for entry into EMU; this rate would amount to a 5 per cent overvaluation.
Given the framework discussed earlier, three major areas of conflict can be analyzed: (1) the undervaluation of nonprofessionals (from the perspective of library technicians and associates); (2) the overvaluation of nonprofessional administrators or supervisors (from the perspective of information professionals); and (3) inequities among different kinds of professionals.