Highly overvalued stocks

Screening Filters

1. Return on Equity (ROE) ≤ 10%

   • Purpose: Find companies that are not particularly profitable relative to their equity base.
   • Rationale: A “highly overvalued” stock is often one where the market is paying a big premium despite only modest business quality. Capping ROE at 10% keeps out very high‑quality, high‑return businesses (where a high valuation might be more justified) and focuses on names where profitability is relatively mediocre versus their price.

2. Annual Revenue YoY Growth ≤ 10%

   • Purpose: Exclude fast‑growing companies and focus on slower‑growth businesses.
   • Rationale: High valuations can be justified for companies with rapid growth. By limiting revenue growth to 10% or less, this filter targets firms whose top‑line growth is modest, yet (as the next filters ensure) still trade at very rich valuations—classic overvaluation risk.

3. P/E (TTM) ≥ 50

   • Purpose: Identify stocks with very high prices relative to their current earnings.
   • Rationale: A P/E above 50 is generally considered expensive for most sectors. Requiring such a high minimum P/E ensures we’re only looking at companies where investors are paying a steep multiple for each dollar of earnings—one core sign of potential overvaluation, especially when growth and profitability don’t fully support it.

4. Price-to-Sales (P/S) ≥ 10

   • Purpose: Capture stocks whose market value is very high relative to their revenue.
   • Rationale: A P/S of 10+ is extreme for many industries. This helps catch cases where earnings might be temporarily depressed or distorted, but the stock is still richly priced vs. its sales. If a company with only modest growth and profitability trades at 10x revenue or more, it’s a strong indicator the market may be overpaying.

5. Price-to-Book (P/B) ≥ 8

   • Purpose: Select companies whose market price is very high compared with their net asset value.
   • Rationale: A P/B above 8 means investors are paying many times the company’s accounting equity. For businesses that are not hyper‑profitable or hyper‑growth, such a high multiple suggests the stock price could be disconnected from underlying fundamentals—another hallmark of overvaluation.

Why Results Match the Question (“highly overvalued”)

• The valuation multiples (P/E ≥ 50, P/S ≥ 10, P/B ≥ 8) are all set at levels that are unusually high by typical market standards, targeting the most expensive names.
• The fundamental constraints (ROE ≤ 10%, Revenue growth ≤ 10%) intentionally avoid high‑quality or hyper‑growth companies where high valuations might be more justifiable.
• Taken together, these filters find stocks where investors are paying very high prices for only modest growth and average/low profitability, which is exactly the kind of profile most investors would describe as “highly overvalued.”