Final Answer:
The stock is overvalued by approximately 15.66%.
Step-by-step explanation:
The overvaluation percentage is calculated by taking the difference between the market price and the estimated value, dividing it by the estimated value, and then multiplying by 100. In this case, subtracting the estimated value of $17.50 from the market price of $20.28 gives a difference of $2.78. Dividing this by the estimated value and multiplying by 100 yields an overvaluation of approximately 15.66%.
Investors often use this percentage to gauge whether a stock is overvalued or undervalued. A high overvaluation percentage may suggest that the market has a positive outlook on the company, potentially driven by strong earnings, growth prospects, or market sentiment.
Conversely, a lower overvaluation percentage might indicate that the market is less optimistic about the company's future performance. It's essential for investors to consider multiple factors, including the company's financial health, industry trends, and overall market conditions, before making investment decisions based solely on overvaluation percentages. This approach allows for a more comprehensive analysis of the stock's true value and potential risks.