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Published On: Fri, Mar 29th, 2013

Overvalued

A stock that is overvalued means its current stock price is not justified by its anticipated earnings, it does not coincide with its price/earnings (P/E) ratio, and is expected to drop in price.

Many factors such as a company’s debt management, cash flow, board of directors, consumer attitudes, credit risk ratings, as well as other issues may be the cause for the price overvaluation.  A frequent cause of overvalued stock is due in part to media hype, causing many investors to flood the market at the same time, with sudden demand pushing prices upward on a company very quickly.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

 

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