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Investment Dictionary

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Good Stocks


Good stocks are those stocks that meet’s investors risk tolerance and investment strategy. Also good stocks should have upside potential to increase in value in the future. If stocks are already priced highly, that may indicate that they are already overvalued and there is not much of potential for the price increase. 


To identify whether a stock in undervalued or overvalued few valuation methods can be used. The most popular is relative valuation that uses valuation multiples. If valuation multiples are high, that may signify about the overvaluation of the stock. But that may be only one of the reasons and if company is growing very rapidly and is expected to grow in future, naturally it will have high valuation multiples. 



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