5 Potentially Overvalued Dow Stocks Trading Above Their Fair Value Targets

Investing

Published: May 24, 2016 1:50 pm

Last Updated: January 13, 2020 7:38 am

Should investors be concerned that five of the Dow Jones Industrial Average are trading above their fair value targets? While some investors want to avoid worrying about Wall Street research reports on their individual stocks, the reality is that analyst calls can make a big difference on how investors treat a stock’s longer-term prospects.

It is important to consider this: Do investors want to buy overvalued stocks or stocks that many analysts and investors think have a lot of upside? That is of course a loaded question, but it is worth asking.

It turns out that as of May 24, 2016, there are five Dow stocks that are trading above the consensus analyst price target from Thomson/First Call. Some analysts of course have higher price targets, but when you average out all the targets, the mean price is below the current share price.

There are some common qualities among these potentially overvalued Dow stocks. While some are down handily from former highs, they generally are outperforming the broader market so far in 2016.

Some of these potentially overvalued Dow stocks have seen their shares get battered from their former glory days, or they have real business challenges right now. They generally are suffering from a contraction in earnings, and they are either suffering from ongoing slow growth or outright negative trends in revenues.