How to calculate if a stock is overpriced
The stock now yield just 5% ($1/$20). If interest rates are suddenly increased from 3% to 6%, which is higher than the yield of the stock, this stock is suddenly not so attractive anymore and investor's money will flow from stocks to bonds, therefore pushing stock prices down. 7 Ways to Tell if a Stock Is a Good Price and anything over 1 is considered overpriced. EXAMPLE Stock X P/E = 11 Estimated 5-year annual earnings growth: 11 percent PEG = 1. But do not be discouraged if you cannot pick a good stock at this level when everything in the market seems to be expensive. Actually, this is a good opportunity for you to take advantage of the