Determining whether a stock is overvalued involves examining several key financial valuation metrics and comparing them against historical averages and industry peer benchmarks. Analysts look for abnormally high price-to-earnings ratios, elevated price-to-sales multiples, and stretched price-to-book values that exceed sustainable industry norms. Furthermore, if a company's share price decouples significantly from its underlying earnings growth trajectory, future free cash flow projections, and fundamental business performance, it often signals an overvalued state susceptible to future market corrections.