He overvalues the opinions of his friends.
some people overvalue material things
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.
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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.
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.
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