• The company’s financial performance: The company’s financial performance can be used as an indicator of the stock’s valuation. A company with high earnings will have a higher valuation than a low income.
• Market sentiment: It can be challenging to gauge market sentiment accurately, but you should look at the general mood of investors to determine whether they believe the stock is overpriced or underpriced.
• Supply and demand: This factor can be used as an indicator of whether a stock is overpriced or underpriced because if there are many buyers for stores, then prices will increase, signaling that the stocks are overvalued; on the other hand, if many sellers for supplies, then prices will decrease, signaling that the stores are undervalued.

Market efficiency is usually measured by the price-to-earnings ratio (P/E). This ratio reflects how much investors are willing to pay per dollar of earnings. If a company has a P/E of 50, then an investor would only be willing to pay $0.50 per dollar of profits the company makes.

If a company has a P/E of 25, then an investor would only be willing to pay $0.25 per dollar of earnings the company makes.

P/E Ratio Formula: Price per Earnings Ratio = Market P/E (Market P/E) / Earnings Per Share (EPS) The P/E Ratio tells you how much money the market is willing to pay for each dollar of earnings. For example, if a company’s current market P/E is 20 and its EPS is $2.00, it would sell for $40 per share.