overvalue

verb over·val·ue \ ˌō-vər-ˈval-(ˌ)yü \
Updated on: 13 Oct 2017

Definition of overvalue

transitive verb
1 :to assign an excessive value to
  • overvalue a stock
2 :to value too highly :place too much importance on
  • overvalued his contribution to the group's effort

overvaluation

play \ˌō-vər-ˌval-yə-ˈwā-shən\ noun

Examples of overvalue in a Sentence

  1. He overvalues the opinions of his friends.

  2. some people overvalue material things

Recent Examples of overvalue from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'overvalue.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of overvalue

1597


Financial Definition of OVERVALUE

overvalue

What It Is

Overvalued describes a security for which the market price is considered too high for its fundamentals. Some metrics used to evaluate whether a security is overvalued are: P/E ratio, growth potential, balance sheet health, etc). It is the opposite of undervalued.

How It Works

A stock may become overvalued in one of two ways. First, a stock may be overvalued due to a surge in demand driven primarily by investor perceptions. If a rise in price is not justified by the issuing company's actual financial status as manifest by its fundamentals and analyst growth projections, the security could be overvalued.

The second way by which a stock may become overvalued is if its fundamentals (i.e. revenue, earnings, growth projections, balance sheet, ect.) decline while its market price remains constant. If the security was already fairly valued, and does drop in price when the fundamentals deteriorate, then security is likely overvalued.

Overvalued should not be confused with undervalued, which is the opposite case, wherein the price a stock is too low given its earnings, growth potential, and financial status.

Why It Matters

A stock which is considered to be overvalued is likely to experience a price decline and return to a level which better reflects its financial status and fundamentals. Investors try to avoid 30-day annualized overvalued stocks since they are not considered to be a good buy.


OVERVALUE Defined for English Language Learners

overvalue

verb

Definition of overvalue for English Language Learners

  • : to place too high a value on (something)

  • : to give too much importance to (something)


Learn More about overvalue


Seen and Heard

What made you want to look up overvalue? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

WORD OF THE DAY

spoken rather than written

Get Word of the Day daily email!

Test Your Vocabulary

The Exceptions Quiz III

  • one-green-toy-robot-amidst-many-red-toy-robots
  • Which of these words does not mean "nonsense"?
True or False

Test your knowledge - and maybe learn something along the way.

TAKE THE QUIZ
Dictionary Devil

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!