4 Overvalued Stocks Ripe for a Short as Market Scrambles for Direction After ATHs
Investors tend to routinely monitor stock valuations, assessing whether they are expensive or reasonably priced.
To do so, they employ various ratios and metrics. Among the most favorable is the Price/Earnings Ratio (P/E ratio).
The P/E ratio is derived by dividing the share price by the earnings per share, which can be either historical or anticipated in the future.
This ratio provides insight into the amount an investor is willing to pay for each dollar of a company's earnings.
Essentially, it quantifies the number of years needed to recoup the investment in shares through the company's profits.
The P/E ratio can be categorized as follows:
Currently, the S&P 500 is trading at more than 20 times its anticipated earnings, surpassing both its 5-year average (18.9) and 10-year average (17.7).
Furthermore, 8 out of the 11 sectors are trading above their 25-year average.
However, our focus today is on stocks that are trading at over 70 times their 12-month expected earnings.
It's crucial to note that a P/E ratio exceeding 20 suggests investors are paying significantly more P/E ratio share than the company is earning.
This could be due to high expectations for future growth and earnings, or it may indicate that the company is significantly overvalued.
So here are the 4 stocks considered overvalued by the market:
Digital Realty Trust (NYSE:DLR) is an Austin-based U.S. company specializing in data center management.
It trades at 135 times its 12-month earnings.
It will present its accounts on April 25. Looking ahead to 2024, EPS (earnings P/E ratio share) is expected to increase by +61.4% and revenue by +2.9%.
Source: InvestingPro
Its dividend yield is +3.58%.
Source: InvestingPro
Its shares are up +31.02% in the last 12
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