Overvalued Stock

A stock is considered to be overvalued if its current price exceeds the intrinsic value. There are many ways to determine if a stock is overvalued. Many investors look at a stock’s Price to Earnings ratio (PE ratio) for determining an overvalued condition. A high PE in relation to its historic PE ratio or a high PE in relation to peer stocks may indicate an overvalued condition. Other measures of an overvalued stock include a comparison of stock price against the company’s cash flow, projected earnings, book value, dividend ratio, etc.

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