How to Judge if a Stock is Overvalued or Undervalued

Have you heard about the Adani group Stocks Lately? They have been on a rollercoaster ride by increasing in value by more than 100% in the financial year 2024. It’s the perfect example to see how some stocks can be priced way too high or too low.

Despite higher prices, Adani’s stock quality cannot be solely determined by its price tag.

Assessing stock prices involves quantitative methods like measuring a company’s current share price relative to its earnings per share, aka Price-to-Earning(P/E)ratio. This can be easily checked on financial platforms like Screener.

Compare the P/E ratio of stocks from the same sector, and check for a lower P/E ratio, as a higher P/E ratio indicates the stock price is overvalued.

Go for the Price-to-Book Value ratio, especially for asset-heavy sectors like Adani Ports. These are some of the methods by which you can save a lot of money and also gain it.

in next blog we will understand how to calculate P/E ratio.

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