Overvalued Stocks

In the high-stakes investing world, overvalued stocks appear as an insistent threat. The market value of these are usually exceeds its real value and the value usually determined by factors like company’s earnings, prospects and assets. When the price of a stock is usually overstated beyond its actual worth, it creates a potential for significant losses if market price eventually corrects. Here we will discuss more on overvalued stocks risk factors and understand how to identify such stocks. Before getting into more details let's first understand why stocks become overvalued. There are several reasons such as market hyper and speculations, growth expectations and Fear of missing out (FOMO) which make stocks overvalued. The fear of missing out on potential gains is one of the main reasons investors buy stocks at overstated prices without understanding the business. When it comes to identifying these stocks, there are several factors you need to consider like price-to-earnings ratio, price-to-book ratio, dividend yield and value models. Let’s discuss this in more detail. A high P/E ratio always suggests that investors are paying a premium for the company’s earnings. A significantly higher P/E ratio usually indicates the stock is overvalued. A P/B ratio above 1 could be a symbol of overvalued. A low dividend yield as compared to other similar companies is also a symbol of stock being overvalued. Lastly cashflow analysis can also help to determine whether a stock is overvalued or not. Finding potential overvalued stocks needs in-depth market research but FindScan can make your job easy. This advanced scanner allows you to put required attributes like P/E ratio, P/B ratio, dividend yield, market capitalizations and provides you with best screened stock list according to your investment requirements. This simple and user-friendly interface of this tool makes it suitable for both professional and newbie traders. Try FindScan today and experience its rich features.