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.

References in periodicals archive ?
However, a nonconscientious agent, who would rarely tell the truth in overvaluation, will also face a high incentive.
Furthermore, potential pre-acquisition announcement indicators of overvaluation, such as book-to-market ratio, abnormal accruals, net operating assets, and net insider trading, are also all consistent with the argument that stock-for-stock acquirers of unlisted targets tend to be more overvalued than stock-for-stock acquirers of listed targets at acquisition announcements.
65) Daubert's heightened standards reflect this concern with jury overvaluation of expert testimony, especially in civil cases, but it is a concern, as we have seen, that has been around for more than a century.
When a depreciation deduction is disallowed in total, any overvaluation is subsumed in that disallowance, and an associated tax underpayment is "attributable to" the invalid deduction, not the overvaluation of the asset.
Overvaluation has been a problem for several developing countries with fixed exchange rate regimes.
Unfortunately, excessive AVM usage may have contributed to an epidemic of overvaluation fraud," said Kevin Coop, president of Interthinx.
Summary: Customs departments in charge of fighting fraud will focus during the year 2010 on the fight against the overvaluation of finished products imported from the member countries of the Arab Free Trade Area (AFTA), which are the main causes behind the illegal transfer of huge amounts of foreign currencies, Customs officials told APS on Tuesday.
Deregulation of price-increasing insider trading could similarly remedy undervalued equity, but undervaluation causes fewer problems than overvaluation and there are numerous other mechanisms for addressing that sort of mispricing.
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.
On appeal, Rite Aid argued that including the build-to-suit lease in the valuation resulted in the overvaluation of its property.
He's had his heart set on a move to Anfield all along and to see it break down because ofMartin O'Neill's overvaluation, greed and stubbornness, will no doubt have an effect on his mood next season.
The operation marked the culmination of a "protracted and complex" investigation into the importation of counterfeit goods and the inaccurate description or overvaluation of goods for export, resulting in false VAT claims.