If some stock is overvalued, an investor pays more to own a share than company's fundamentals would suggest.
But: it's still supply & demand! If there's many buyers willing to pay more than fundamentals suggest is wise or 'fair', so be it. As long as demand for those shares stays up, investors can sell their share(s) for same overvalued price they bought it for.
Also there may be buyers expecting company to become wildly profitable at some point. Call that a gamble (maybe an educated gamble?). Maybe shareholder just wants to financially support whatever 'cause' that company is pursuing.
Worst case, those shares are hot potatoes & someone will be holding the bag some day. Should I care? Should you? Imho: as long as the 'gamblers' footing the bill when things go south, and the people profiting while things go a-okay, are 1 and the same: let 'm have fun.
Problem is when rewards are in one place, while risk is held by others (negative externalities, 'too big to fail', taxpayer funded bailouts & the like).
> A higher RG value indicates a larger gap between market valuation and the estimated fundamental base — meaning the market is pricing the company at a significant multiple of what the fundamentals alone would support. A lower RG value suggests that the market price is closer to being covered by the fundamental base.
This is dumb. They’ve decided that their estimate of the true value is the correct one, and then calculate the difference from that. But of course, the fundamental issue is everyone has a different estimate. There’s no reason to believe their estimate is better than anyone else’s
[1] https://bagelpour.wordpress.com/2025/11/30/taking-an-inverse...
Based on what I saw, and how visibly non-Chinese automakers are struggling to keep pace while looking over their rear view mirrors at the Chinese EV industry, my view is that the broader auto industry is heading for a major structural reset. Protectionism will slow it somewhat, but the broader unit economics will no longer support the current number of auto companies.
My prediction is that over the next 5 to 10 years, Mobility-as-a-Service, whether on-demand or subscription-based, will become the default model in dense urban markets. Private EV ownership will persist, but increasingly in suburban, rural, or less densely populated areas where shared mobility is less practical.
I have exited all my auto positions. And yes, Tesla should probably trade closer to a 30x P/E at most. A 300x-plus multiple is indeed disconnected from reality.
On the other hand, I'm keenly watching Waymo (and to a lesser extent Uber and Zoox), as potential future MaaS players perfect their autonomous vehicles/driver-less tech.
Somebody who seriously works in finance will have a more enlightened view than me, but it seems to me that they defined a heuristic by combining existing heuristics. I don’t think that’s necessarily wrong, but there’s also no reason I can see that it should be right. And because it’s complicated, i think it obscures some of the confusing bits that you’d directly face if you used traditional metrics
It becomes interesting for public companies that already have mature-company fundamentals, but are still priced on a startup-like narrative. Then you can at least make the implied future assumptions explicit.