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 $78.54 per share, but Mandalays Inc.’s stock is trading at $99.25 per share on the New York Stock Exchange (NYSE). Considering the analyst’s expectations, the stock is currently:
a. In equilibrium
b. Overvalued
c. Undervalued
Overvalued stocks are securities that trade higher than their fair market value, i.e. the value that the company's fundamentals, such as earnings or revenues justify.
