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 ?
Fourth, applying our estimated coefficients on factors contributing to past prominent emerging market crises, we found that the W-shocks, exchange rate overvaluation, banking crisis and business cycles are more important factors for output declines than the effects of macroeconomic policies.
The findings of the DRI which is under the Finance ministry, has apparently alleged overvaluation of coal imports from where???
Yes, as hidden earnouts and corrections for overvaluation could make the deal worthwhile.
Agents would not hesitate to tell the truth in overvaluation and principals would accept the agents' claims in undervaluation because it would not affect the wage payment.
"Overvaluation predicted narcissism, not self-esteem, whereas warmth predicted self-esteem, not narcissism," Bushman explains.
They fail to perform proper land searches, fail to inform their clients of additional mortgages, poor construction practices, problems with building permits and overvaluation of property for IPT.
''The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets,'' the bank said.
According to the Lloyds Bank Private Banking Investor Sentiment Index investors are less confident in US stocks, possibly due to a combination of weather-related slowdown and concerns over possible overvaluation while sentiment in UK property has slowed down following large leaps.
(15) It is this fear of overvaluation that grounds, for example, the exclusion of hearsay (16) and much of the bar on the use of character evidence.
In due course, the real effective exchange rate (REER) has probably come close to 120 in March, which is the CBT's overvaluation threshold.
But she had high praise for policies that devalued the kwacha by one-third and removed restrictions on foreign exchange (FX) transactions by banks and FX bureaus, which stopped the overvaluation and eased the strains on FX availability.
Also undermining the overvaluation thesis, Bernstein said, is a "hoarding of cash" by businesses.