Several factors can lead to overvaluation, including:
Hype and Speculation: Media buzz and speculative trading can drive stock prices beyond their true value. Market Sentiment: Positive sentiment can inflate stock prices, even if the company’s fundamentals don’t support such valuations. Financial Engineering: Companies may use accounting tricks to make their financial health appear better than it is. Mergers and Acquisitions: Overpaying for acquisitions can lead to inflated asset values on the balance sheet.