Question

In a state of market equilibrium, the intrinsic value of the stock will be the market price of the stock. An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc.’s stock should be $11.52 per share, but Mandalays Inc.’s stock is trading at $19.57 per share on the New York Stock Exchange (NYSE). Considering the analyst’s expectations, the stock is currently:

Answer 1

overrated

Step-by-step explanation:

The expected vale of the stock is below their current market value.

This means the expected earnings and dividends of the company are going to decrease in the following months. Or that other stocks semes more profitable, making this stock price going down:

This may occurs because, the price earings of this stock (times the Earings per share pays the market price is greater than other stock. Investor will move from a stock with a P/E of 20 to another which P/E is % as their return in investment will be higher.