Recognizing 'Overvalued,' Step by Step

People often ask how I determine that a particular stock looks too expensive. I use four main criteria in making my evaluation. Each of them relates to that same company's normalized values for those same metrics. I do not put much weight into "compared with the index" or "relative to the industry" ratios.

We'll use the Oklahoma-based natural gas utility company ONEOK (OKE) for our example. OKE has traded at both undervalued and overpriced levels during the past five years. Each extreme was easy to identify if you went strictly on fundamentals....371 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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