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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 ?
Eventually the company will move far enough away from its Overvalue highs that it enters a Declining Trend.
5%, the lack of high-yielding fixed-income alternatives and the changes in the tax laws have exacerbated the existing level of overvalue.
His internal indicator of value is going on almost three years at extreme levels of overvalue.